Savers expected to move their money

More than 1.6 million savers in building societies that are planning stock market flotations will move their deposits to rival higher-paying accounts in the coming months, according to new research yesterday.

The survey for Save & Prosper opens up the prospect of a scramble for cash between financial institutions as more than 10 per cent of de-mutualised savers prepare to embark on a nomadic search for the best deals on the market.

"Competition among banks and building societies will increase as each vies for new customers," said Stephen Richardson, banking and sales director at Save & Prosper.

"The focus is once again on interest rates offered by banks and building societies. Those unable to keep up with the competition may witness more defections from disgruntled investors."

Save & Prosper's poll was carried out by NOP among members of Halifax, Alliance & Leicester, Woolwich, Bristol & West and Northern Rock, which are either planning to demutualise or are being taken over by a bank. The poll found that although the majority were happy to receive free shares from the demutualisations, only 48 per cent approved of the fact that building societies would become banks. Some 23 per cent were not sure either way.

Only 7 per cent of members were expected to spend their bonuses right away, while up to 4 million savers - 25 per cent of the total - may cash in the shares immediately and save some or all of the windfall.

In recent months, a number of building societies have made direct pitches for former members of National & Provincial, which was taken over by Abbey National last year. A major pro-mutual offensive spearheaded by the Building Societies Association is planned in the summer.

A Woolwich spokesman said yesterday: "Certainly, investors will shop around. But if there was going to be a mass outflow of funds we would have seen it straight away, once members voted for conversion."

Alliance & Leicester said: "We think we offer competitive interest rates. We have loyal investors who have been with us for a long time. The terms of our deal with them have not changed in any respect other than they are now shareholders."

Halifax Building Society did not return calls.