Comment: Up and up go the costs of Halifax conversion

Most mortals are going to find the amount being spent by Halifax on merging with Leeds Permanent and then floating on the stock market hard to understand or justify. At pounds 413m, once everything is totted up, it is equal to the cost of several spanking new hospitals. Alternatively, it could be made to pay for about half the planned uplift in Government spending on education next year, or to cut the deficit to a level which might qualify Britain for the single European currency. It dwarfs even the costs of preparing the water companies for privatisation and then floating them on the stock market.

Looked at another way, it is about 10 per cent of what Halifax and Leeds combined pay their depositors each year in interest. Even taking into account the fact the bulk of the cost is being incurred on the merger, expenses which presumably can be quite swiftly recouped out of subsequent cost savings, we are still talking about quite spectacular numbers.

Costs associated with the flotation alone are expected to come out at pounds 153m. That may not look unduly high set against the company's expected pounds 11bn stock market worth, or the usual percentages charged by the City, but given that this float does not need to be marketed or underwritten in any way, the figures still look out of all proportion. The reason, Halifax claims, is the enormous costs associated with communicating with its 9 million members. The sheer bulk of the necessary documentation is way above anything seen before, and as a consequence unanticipated to some degree.

The obvious question is whether the exercise justifies the expenses. Halifax, it will be recalled, was a late convert to the idea of conversion. The full story of how it came to change its mind has yet to be told. For some years, Jon Foulds, the chairman, held out against it, giving long and highly articulate dissertations on why it wasn't for Halifax. Then the scales fell from his eyes, the dyke was breached and those that still cling to mutuality are now the odd ones out. But the assertion that Halifax will be better for its members as a joint stock company has yet to be proved.

Nationwide argues that what the others are going to have to pay out in dividends can in their case be used to offer their members keener interest rates. On the face of it, this is not an easy thing to argue against. The costs of the Halifax-Leeds merger and its subsequent flotation would be worth approximately half a percentage point to its depositors, the sort of advantage competitors would kill for. But with all those free shares around, who is going to dispute the costs?

Suggested Topics
people And here is why...
peopleStella McCartney apologises over controversial Instagram picture
Arts and Entertainment
Hayley Williams performs with Paramore in New York
musicParamore singer says 'Steal Your Girl' is itself stolen from a New Found Glory hit
ebooksAn unforgettable anthology of contemporary reportage
William Hague
people... when he called Hague the county's greatest
indybestKeep extra warm this year with our 10 best bedspreads
Life and Style
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Trust Accountant - Kent

NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

Law Costs

Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

Day In a Page

Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

The children orphaned by Ebola...

... then rejected by surviving relatives over fear of infection
Pride: Are censors pandering to homophobia?

Are censors pandering to homophobia?

US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
The magic of roundabouts

Lords of the rings

Just who are the Roundabout Appreciation Society?
Why do we like making lists?

Notes to self: Why do we like making lists?

Well it was good enough for Ancient Egyptians and Picasso...
Hong Kong protests: A good time to open a new restaurant?

A good time to open a new restaurant in Hong Kong?

As pro-democracy demonstrators hold firm, chef Rowley Leigh, who's in the city to open a new restaurant, says you couldn't hope to meet a nicer bunch
Paris Fashion Week: Karl Lagerfeld leads a feminist riot on 'Boulevard Chanel'

Paris Fashion Week

Lagerfeld leads a feminist riot on 'Boulevard Chanel'
Bruce Chatwin's Wales: One of the finest one-day walks in Britain

Simon Calder discovers Bruce Chatwin's Wales

One of the finest one-day walks you could hope for - in Britain
10 best children's nightwear

10 best children's nightwear

Make sure the kids stay cosy on cooler autumn nights in this selection of pjs, onesies and nighties
Manchester City vs Roma: Five things we learnt from City’s draw at the Etihad

Manchester City vs Roma

Five things we learnt from City’s Champions League draw at the Etihad
Martin Hardy: Mike Ashley must act now and end the Alan Pardew reign

Trouble on the Tyne

Ashley must act now and end Pardew's reign at Newcastle, says Martin Hardy
Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?