As Co-op makes a clean break with its past, how about a break with the bank?

Outlook

It looked doubtful at one point, but the Co-op is giving every impression of having set a course for calmer waters. This despite its flagship grocery business finding itself in the midst of a price war that has left many of its rivals gasping for breath.

The irony is that having fallen into a malaise common to all too many plcs – bad governance; bad, debt-fuelled deals; and bad management paid too much to do a bad job – it has embarked on a turnaround by adopting some of the disciplines held dear by the best plcs. That has meant being prepared to jettison non-core businesses, such as the pharmacy chain and the much-loved farming business. The antiquated and unwieldy governance structure – which saw people using political savvy to climb the greasy poll despite limited business experience –has also been reformed; the old guard has been purged. Even the hallowed dividend payments are on hold.

All this has facilitated the emergence of a business that, it seems, is being run with a degree of sense and professionalism – a business that now has sufficient financial and management stability to be able to do things differently again.

As such, the society is handing everyone from shelf stackers to secretaries an inflation-shattering 8.5 per cent pay rise, putting it well ahead of schedule in complying with George Osborne’s “living wage”.

The cost of the pay rise, together with a commitment to keeping prices competitive and the continuation of a store refurbishment programme, will crimp profits in the second half. But the moves should pay long-term dividends. Happy staff working in cheerful stores make for contented customers who will come back.

The challenge for the business now is to keep it up and ensure the turnaround is successfully completed. That will take discipline together with a determined effort not to fall into the bad, old entitled habits of the bad, old Co-op. The omens, at least for now, look good.

The only real question is why the group is retaining its 20 per cent stake in the Co-operative Bank. The latter’s turnaround is proving much slower to materialise, but that hasn’t stopped it paying its executives handsomely. With no let-up in the flow of damaging headlines, it might be better to consign the historic link between the two to history to the benefit of both parties.