The Hilary Clarke Interview: Into battle to save Britannia
The smell of cordite is in the air as the building society's new boss, a military historian, prepares to take on the carpetbaggers
Sunday 21 February 1999
At the annual general meeting on 29 April Michael Hardern, Britain's unofficial carpet- bagger-in-chief and part-time butler, will stand for election to the board of directors. If the society's members choose to vote Hardern on to the board, they will in effect be giving a thumbs up to his quest to turn the building society into a bank.
Hardern's name crops up almost immediately during my interview with Stow at Britannia's headquarters in the ancient market town of Leek, and it wasn't me who mentioned it first. We were in fact talking about coffee and how, in a symbolic gesture of cultural change at the company, Britannia directors now have to get their coffee from the vending machine like the rest of the troops. "Time's not on our side," says Stow, in his John Lennon accent, as he goes through some of the restructuring he has undertaken since he joined in 1996. "The world is getting more competitive every day and we get threats like Mr Hardern ... "
Hardern's nomination to the board follows Britannia's successful thwarting last month of the carpetbagger's attempt to turn it into a bank by proposing a resolution to do just that at the AGM. Britannia managed to declare the proposal legally invalid on the grounds it interfered with the right of directors to manage the affairs of the building society. Now Hardern is trying another tactic.
It is unlikely he will win - this year at least - but that doesn't stop him, or anyone else who wants the building society to become a plc, standing again next year. "Having a referendum on your business every year is hard work," says Stow. Indeed, fighting to keep the building society's status occupies around a quarter of Stow's time already.
Stow, looking dapper, flamboyant even, in his pinstriped suit, striped shirt and brightly coloured tie and braces, is counting on the loyalty of the society's members to resist the carrot of a windfall payment should the society float. "One of the great things about building societies, with the exception of the very big ones like Nationwide, is they have a very strong regional characteristic," he says.
About half Britannia's members live within 50 miles of Leek in Staffordshire. A recent Britannia competition to try to identify the longest-serving member turned up more than 20 people who had been with the building society for 70 years or more. "Not only had they been members but their parents had been members," says Stow.
Indeed, the taxi driver who drove me from Stoke-on-Trent station to Leek said he would leave Britannia immediately if it demutualised. "All the surveys show that members trust building societies more than they trust banks," says Stow confidently. "I asked when I first came what was the difference between a building society and a bank and one answer I got was that members take babies to building societies to show the staff. I thought that encapsulated it."
If the Britannia were to lose its mutual status, it would not be long before someone else bought it. "If the Britannia is forced to convert, it can't stand on its own. It has to find someone to take us over," says Stow, drawing a comparison with the nearby Birmingham Midshires Building Society, recently taken over by the Halifax. That, says Stow, would be disastrous for a local economy already reeling from the dramatic decline of the pottery industry.
Not all of Britannia's members are unemployed potters, though. Probably the most famous one is Peter Mandelson, the former trade and industry secretary, who was sacked from his job after it transpired he had borrowed pounds 373,000 from another minister to buy a house. Britannia fell into the spotlight because it lent Mandelson the rest of the money needed to buy the house in Notting Hill Gate, west London. Stow, not surprisingly, won't say much about it. "We have a duty of confidentiality to our members. We made a statement because the matter was so public, which we agreed with him. If I start talking about members' business you would ask what kind of society are we." He says Britannia executives never met Mandelson.
A bigger threat to building societies' bottom-line profits than socially ambitious ministers is falling interest rates. "Yes it [the rate situation] does present some challenges but I guess there will come a point below which mortgages won't sink. At the moment we are pretty comfortable with the situation. It is going to get difficult but that will be the same for banks as well."
Although he now boasts a chief executive salary, Stow says he is "just a working-class lad": he grew up in Aintree, and his father was an officer in the merchant navy and then a factory worker. All his spare time is spent researching military history, a hobby that has taken him all over the world. Colonel Custer and the battle of the Little Big Horn in Montana is his favourite subject. Stow says his fascination with wars comes not from a bloodthirsty streak but a genuine interest in people. "I don't see any glory in war at all. It's a terrible business. What fascinates me is how ordinary people do very extraordinary things in very difficult circumstances."
Fortunately his wife Christine is also an enthusiast and accompanies him on his trips. Stow has three sons from his first marriage: one is a policeman, another a student at Berkeley University in California and the third has gone into retailing - his father's stamping ground,
Traditionally, building society leaders come through the ranks but with competition hotting up Stow - like those who head the Nationwide and the Bradford and Bingley - is part of a new breed who come from outside.
Stow's first retail job was with Littlewoods, which he started after his "A" levels. George Davies, founder of clothing retailer Next, started at Littlewoods on the same day as Stow and the two have remained friends. Stow rose through the ranks, first as a manager in the retailing sector. He ended up as director of personnel for the whole group, which at the time comprised a pools and mail- order business.
"It was the kind of company you could stay with for life - it had a very strong culture," he says. However, "I got divorced in 1982 and it seemed a good time in my life to change."
He spent a short period as a head-hunter before joining Asda, the supermarket chain, where he rose to the position of chief executive for the stores division.
Stow left Asda in 1991 and went to work for an insurance firm in the City before joining Britannia in 1996 as head of retail operations.
"My feeling was we had to convince the business here they were in the retailing business. Some people here saw themselves as bankers and not retailers, but the principles are the same," he says.
He starts to wax lyrical about the changes that have been made and the quality of the staff at Britannia. Just as I was thinking he was beginning to sound like a salesman, he admits as much himself. "You can tell I'm a retailer. Old habits die hard."
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