Profile: Evolution of a big lender: A background in venture capital taught Halifax chairman Jon Foulds the value of a management able to cope with crisis, writes William Kay

IF IT had not been for cheap foreign imports, Jon Foulds might have been a Lancashire cotton weaver today. As it is, he chairs Halifax Building Society - the world's biggest mortgage provider. And although Jim Birrell, his chief executive, is a year younger, it is he who will be retiring at 60 next year, while Foulds continues to steer the Halifax through the housing crisis.

Last week, Foulds exercised his influence to clear the log-jam at the top and pave the way for the appointment of Birrell's successor. Mike Whitehouse, the building society's operations director and reckoned to be the leading candidate, suddenly resigned. His job was abolished in an internal reorganisation, leaving the way for Foulds to appoint an outsider.

The search could not have come at a worse time for the industry. The society recently published its House Price Index for September, showing a record fall of 3.1 per cent. There were freak factors, mainly to do with the restoration of stamp duty in August, but Foulds is very pessimistic.

'I'm afraid I think we're in for a long haul,' said Foulds. 'There are no magic wands which can be waved.'

It is typical of the Halifax's understated style to stand apart from the various schemes that have been thrust under the Government's nose this year to get house sales moving again. Foulds and his senior lieutenants have been quietly lobbying behind the scenes.

'The Government has so far not shown much sign of wanting to do something for the housing market which is going to cost them a great deal of money,' Foulds said.

'Were they to be interested in doing that, we have a number of ideas which might be helpful, and we have actually talked privately to ministers and to the Treasury about some of them. But we really feel it's a time for private discussion rather than public declamation. That's why you haven't seen us making big public statements about what to do.'

In its autumn bulletin issued on Friday, however, even the Halifax called on the Government to slash interest rates and intervene directly in the housing market to avoid 'crisis measures' next year.

For all the Halifax's lack of show, the rest of the financial market agrees that it is the player to watch. Although it rarely innovates, its decision whether to follow a particular development is anxiously analysed by the competition.

No issue attracted greater controversy than Abbey National's decision to turn itself in 1989 from a mutual society, owned by its members, into a public limited company quoted on the stock market. The Halifax has so far refused to follow.

'It's an option,' Foulds admitted, 'but I don't believe that it's something we're going to contemplate in the foreseeable future. We're quite happy as we are, actually.'

Foulds is very much a visitor to Halifax's towering head office in the Yorkshire Dales. He lives in London's St John's Wood and has an elegant office in the City, furnished in tasteful shades of blue, red and beige and dominated by an Andre Minaux painting of lilies sticking out of a bottle.

'I like most things to do with the visual arts,' he explained. 'That painting was my mother's, and I put it there after she died. It's one of my favourite pictures, but the colours go very well in here.'

His French wife, Helene, encourages his artistic bent. They met when they were separately visiting an artist friend in Salford. They married in 1977, and Foulds now lives a largely bi-existence, switching between London, Paris and the ski slopes of France.

'We speak a mixture of French and English at home,' he said, 'to the point where I don't really know which language I'm speaking.'

In an organisation driven by as strong a culture as any in the country, including Marks & Spencer, Foulds has injected an edge in the past two years that may have been lacking under his predecessor, Derek Hornby, the former Tory MP. Whereas the tradition at the Halifax was to have a strong chief executive and a largely titular chairman, Foulds has tilted the balance to something approaching equality.

This is understandable given his career. All but a few years of it were spent at 3i, Britain's biggest venture capital house, where he was chief executive for 12 years. So he has more business clout than some of his predecessors.

'3i was, in the early days, my university as well as my workplace,' said Foulds. 'There were a lot of people there who were more intelligent, better educated and more skilful financially than I was, and I learned prodigiously from them.'

He was born 60 years ago in Bury, Lancashire, the son of a Quaker GP who packed him off across the Pennines to Bootham, the Quaker school near York. 'As time goes by,' Foulds conceded, 'with the sort of honesty and integrity that goes with that Protestant ethic fairly well imbued in me, the Quaker influence is growing. And the Halifax is essentially a low- church, Protestant ethic, Nonconformist kind of organisation. Most of the people there come out of that mould, and so do I'

Tall and lean, he bears a passing resemblance to the actor Peter O'Toole. It would be wrong to draw the parallel too far, but like O'Toole, Foulds had a rebellious phase.

'I wasn't particularly successful academically,' he recalled. 'I was a bit of a rebel in my last two or three years at Bootham, so I probably didn't get the best out of the school. I never had a great sense of vocation, because I never really knew what I wanted to do.'

But help was at hand. Two elderly uncles wanted someone to take on the family cotton business, Thomas Foulds & Sons, so the young Foulds went to what is now Salford University to study the textile trade. After three years of that and a spot of National Service, he took his place in the business.

The rebel had not been completely exorcised - his recommendation to his doting but scandalised uncles was to shut the company.

'Looking back on it,' said Foulds, 'I suppose it was pretty arrogant of me, but I quickly came to the conclusion that unless we sold we would dissipate all that the family had built up in the previous three generations. We couldn't compete with overseas producers, and the best thing to do was to get out.'

With that triumph behind him, the young Foulds had to look for another job. He decided not to put himself in a situation again where he could be vulnerable to foreign competition.

'So for the first time I seriously sat down and thought about what I ought to do,' he said. 'I remember at that time thinking there were two common denominators in all business activity. One was money and the other was property. Every business has to be housed, every business needs money. I suppose if I had gone into property I should now either be bust or very rich, but as it was, the hand of circumstance led me to ICFC, as 3i then was.'

ICFC was a very small organisation. It had been set up by Lord Piercy at the behest of the Bank of England and the clearing banks in an effort to kick-start the economy after the Second World War. When Foulds joined in 1959, it was still chaired by Piercy.

'I was wonderfully happy for almost all of the 33 years that I spent there,' said Foulds.' I lost the odd sleepless night . . . but I always looked forward to Monday morning.'

His regular task was to decide whether to invest in companies that had applied for capital. Inadequate marketing or inadequate financial controls were the usual failings, but Foulds reckoned that he could tell within 15 minutes whether somebody had a business that was of interest to 3i.

'It almost became intuitive,' he said. 'Simple things like, what does he choose to tell you first? If he hasn't chosen anything at all, that tells you something, and if he has chosen it that tells you something too. It's a trade like any other, and as one became more experienced in one's trade one got better at it.'

Foulds never had management responsibility until he became the chief executive of 3i. But he confessed to the occasional yearning to go out into the business jungle and find out for himself.

'Of course, it was the sort of thing inevitably one thinks of if one spends all one's time with family businesses and the people who run them,' he said. 'I was offered things from time to time, but I was just enjoying myself too much where I was, so I stayed. Nothing I was offered was ever sufficiently tempting and I never felt the need to go and look for something.'

The Halifax came looking for him. He met Hornby at a party. It turned out that Foulds had been to children's tea parties at the vicarage in Bury where Hornby's father was vicar. In a welter of nostalgia, Hornby invited Foulds to join the Halifax board.

That was in 1986. Two years later, Foulds retired as 3i's chief executive and succeeded Hornby two years after that.

The watchword at the Halifax nowadays is evolution, not revolution. Like most businesses, the emphasis is on cutting costs and preserving cash. Unlike most businesses, however, the society is making pre-tax profits of more than pounds 600m a year and has assets of pounds 61bn.

'I have always believed in the old axiom 'If it ain't broke, don't fix it,' ' Foulds said. 'It didn't seem to me that, in a revolutionary sense, there was anything that needed to be fixed at the Halifax. If the present difficulties have demonstrated one thing, it is that it has the management to cope with the worst housing finance crisis as long as I can remember. They have responded in a way which I think is extremely praiseworthy.'

Although the Halifax has kept its Whitehall meetings low-key, Foulds believes that the million households exposed to negative equity on their homes constitute a political time-bomb.

'The bulk of those people have no other assets,' he said, 'and if you measured their situation in terms of the Companies Act, they are theoretically bankrupt. In most cases they're not bankrupt, because they're earning money every week. But that must have a substantial political implication.

'To put it bluntly, do you vote for a government which you believe has followed policies which have made you bankrupt?'

(Photograph omitted)