Carpetbaggers pour pounds 1.8bn into remaining building societies

A pounds 1.8bn wall of money flooded into the remaining mutually owned building societies last month, apparently from "carpetbaggers" hoping to cash in on the next wave of society flotations.

The sum, the largest inflow to hit the movement for over 10 years, prompted renewed calls yesterday for at least a temporary halt in the rush of conversions to banks as both the Nationwide and the Birmingham Midshires revealed that it may be only a matter of time before they are forced to convert.

Adrian Coles, director-general of the Building Societies Association, said press speculation had "created an atmosphere akin to a feeding frenzy in some branches.... The disruption that this intense speculation brings is not a situation that should be allowed to continue."

The BSA drew back from following the Consumers' Association in suggesting a moratorium on conversions, but said it was consulting with Helen Liddell, economic secretary to the Treasury, over possible moves to tighten up building society legislation.

The pounds 1.84bn net receipts picked up by societies in June, which excluded the now converted Halifax for the first time, was more than twice the pounds 878m received in May. The BSA suggested there was evidence that some of the money flowing in was due to investors in the new banks, such as Alliance & Leicester and Halifax, switching to the higher rates available from the remaining mutuals.

One society at the centre of conversion speculation, Birmingham Midshires, said yesterday: "We've been flooded with cash by people opening accounts for the last 18 months. We've opened 300,000 speculators' accounts so far this year. We've raised the minimum balance for opening an account three times in the last 15 months. Now its pounds 2,500, but people still aren't put off.

"There comes a time when we may have to call a halt and stop opening new accounts. It's very disruptive to existing customers. We'll see what happens over the next few days," said the spokesman.

As for converting to a PLC, he said: "We never say never. We are open minded."

He added that people's attitudes would be swayed by what happens at Nationwide, the largest remaining society, which faces a vote next Thursday which could well prompt it to convert to PLC status.

Five "rebel" members of Nationwide led by freelance butler Michael Hardern are standing for election as directors of the society. If the rebels are declared elected at Nationwide's agm, and the society is forced to follow Halifax and Woolwich by demutualising, Nationwide's chief executive, Brian Davis, said he would not resign.

An all-party group representing 44 MPs threw its weight behind the board of the Nationwide today. The All Party Building Societies Group of MPs said that "the democratic election system operated by the Nationwide is being severely abused." The group also proposed changes in legislation to protect the remaining societies.