Brown 'must step in to save building society'

GORDON Brown was last night facing demands to step in to secure the future of Scotland's largest building society.

Calls for the Prime Minister to intervene came after it was revealed the Dunfermline Building Society is poised to report a significant financial loss, which threatens its survival.

The demands for action, from both the Scottish and Westminster parliaments, intensified as hopes faded last night that the Dunfermline would be rescued by either the Yorkshire Building Society or the Nationwide.

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• Peter MacMahon's business blog: Murphy must break his silence over Dunfemline

It is understood both have been in talks with the Fife institution, one of Scotland's oldest mutual lenders, but that these have now come to a halt.

A spokesman for the Nationwide, Britain's largest building society, said it was "not in talks" with the Dunfermline. He refused to say if talks had taken place, echoing comments by the Yorkshire on Wednesday that it did not comment on "speculation".

Talks over the society's future were precipitated as it emerged it was set to record a loss of about 26 million for 2008 when the mutual's results are reported within the next two weeks. That compares with a profit of 2 million the year before.

The Scotsman revealed yesterday that the Dunfermline had been left vulnerable by its exposure to the commercial property market, which has been badly hit by the recession.

If neither of the two English mutuals is willing to go to the rescue of the Dunfermline, it will increase pressure on politicians – who have already stepped in to help beleaguered banks – to act.

Willie Rennie, the Lib Dem MP for Dunfermline and West Fife, called on Mr Brown to step in and said he would be asking for a meeting with the Prime Minister, a fellow Fife MP, to ensure the Dunfermline remains a "strong, mutual and independent Scottish institution".

"I want to explore every avenue possible in order to secure the future for Dunfermline," Mr Rennie said. "We cannot let 150 years of heritage be swept way under Labour's first recession. The business can be a strong concern in the future, but it is incumbent on politicians to help ensure its future."

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Mr Rennie said that help could involve approaching the Bank of England, the Financial Services Authority or the government directly, but he wanted to explore what would best help the Dunfermline, which employs about 240 staff in Scotland.

He said he would also be writing to Jim Murphy, the Scottish Secretary.

Mr Murphy has been briefed on the situation at the Dunfermline and would be likely to take up the issue on behalf of the Prime Minister. Last night, however, a spokesman for Mr Murphy refused to comment.

In contrast, Alex Salmond said he was prepared to intervene in an attempt to head off the threat to the Dunfermline. A spokesman said the First Minister was "ready to do anything" he could to help the society.

He pointed out financial regulation was reserved to Westminster, which restricted the Scottish Government's ability to act in cases such as this. He added, however, that it did have a remit over employment and had a "strong interest" in social housing.

"Dunfermline Building Society is a very significant player indeed in relation to the provision of social housing," the spokesman said.

And he went on: "Certainly, we would want the Dunfermline Building Society to remain as an independent financial institution. There would be general support for that right across Scotland and we certainly stand ready to do anything that we can do in order to assist with that."

Tavish Scott, the Scottish Liberal Democrat leader – who has been a consistent critic of the Scottish Government over its failure to publicly argue for the retention of HBOS as a viable Scottish institution – went further.

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He said: "This is a clear case for government intervention to ensure we do not lose a solid part of Scotland's financial infrastructure.

"I would be very worried if ministers were not already fully involved in seeing what influence they can bring to bear to retain the Dunfermline's independence. If they are not already involved, then they certainly should be."

Helen Eadie, the Labour MSP for Dunfermline East, said she would meet building society managers as soon as possible to see whether she could help.

"As a Co-operative member, I am particularly concerned, because it is one of the few mutuals remaining in the country," she said. "I would be extremely concerned and will do anything I can."

Ms Eadie said that, had the Dunfermline's debt problems surfaced at the same time as Northern Rock hit trouble, then she would have been more concerned, but because the government now had a more comprehensive system in place to help banks in trouble, she was less worried.

"However, I will write to Dunfermline Building Society and offer any help I can," she added.

Annabel Goldie, the Scottish Tory leader, said: "It's another terrible sign of the scale and depth of Labour's recession. The staff, depositors and mortgage holders need urgent reassurance about the true extent of the problems and any impact they will face."

A spokeswoman for the Dunfermline said it would be "inappropriate" to comment ahead of its results announcement.

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If the Dunfermline did collapse, savings of up to 50,000 would be secure under the UK government's financial services compensation scheme.