The outlook is good for UK building societies according to KPMG’s 2014 Building Societies Database. The latest edition of the annual financial performance report of the UK’s 45 building societies suggests that there are continued positive signs of growth throughout the sector. However it warns that building societies must be prepared to tackle a number of unprecedented long-term challenges.
This year has seen a strong return to growth in the mutual sector with an increase in pre-tax profits for 35 of the UK’s societies. 32 have increased their total assets and the sector’s total assets have now grown to £316.2 billion. This reflects a significant strengthening of the sector in the UK over the past year. Reserves have increased across the sector and are now at an all-time high of £13.7 billion. Overall, the prospects of the sector in the short and long term remain very positive.
The sector is facing a number of new problems that must be dealt with to ensure continued success. The upward shift in the Bank of England’s base rate from its historic low of 0.5% is unknown and increased ISA allowance and low interest rates are likely to tempt savers away from building societies towards equities.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.