Lack of confidence in banks spells success for building societies

Recently released figures have shown that whilst consumers have been losing confidence in banks, and banks have been losing customers hand over fist, the UK’s building societies have emerged as winners in the current financial climate.

With so many banking disasters hitting the headlines and increasing number of consumers have become worried about placing their cash into the UK’s banks, and this has led to an increase in the number of people opening building society accounts instead.

The figures show that over the course of last year more than one million new building society accounts were opened in the UK, as consumers took their money out of banks and looked for an alternative have for it. The Building Societies Association said that by the end of 2008 building societies held nearly £10 billion more than they had at the start of the year due to an influx of deposits from those that had fled, cash in hand, from their banks.

An official from the Building Societies Association said: ‘The low interest rates that we currently have reduce the incentive to save, but the popularity of building society savings accounts is such that an additional 1.2m accounts were opened over the last twelve months.’

There was also a small outflow of cash from building societies at the start of this year, but the BSA said that this was to be expected, adding: ‘The withdrawal represents less than 4% of the total net receipts received by building societies in 2008. It is not unusual for building societies to have a net withdrawal in January, as savers take money out of their accounts to pay for Christmas expenditure. Outflows have occurred in six Januaries out of the last ten. Adjusting for this normal seasonal factor there was a healthy net inflow of £722m, once again illustrating the popularity of building society savings accounts.’

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