The Abbey National Building Society was formed in 1944 by the merger of the Abbey Road and the National building societies.
It was the first building society in the United Kingdom to demutualise, doing so in July 1989. The bank expanded through a number of acquisitions in the 1990s, including James Hay, Scottish Mutual, Scottish Provident and the rail leasing company Porterbrook. Abbey National launched an online bank, Cahoot, in June 2000.
In September 2003, the bank rebranded as Abbey, and in November 2004, it became a wholly owned subsidiary of the Spanish Santander Group, with a rebrand following in February 2005. In January 2010, the savings business of Bradford & Bingley was combined with the bank, and Abbey National plc was renamed Santander UK plc. Prior to the takeover, Abbey National plc was a constituent of the FTSE 100 Index.
History
Pre-merger: The National Building Society The National Building Society had its origins in the freehold land movement, sometimes called the “forty shilling freeholders movement”. In country areas, the voting entitlement was dependent on the possession of freehold land with an annual value of £2. This required a capital outlay of some £60-70 and was outside the reach of the average worker. A scheme to obviate this capital requirement was launched in 1847 as the Birmingham Freehold Land Society. In simple terms, the society arranged for the purchase of tracts of land and divided them into plots which individuals could purchase, the cost being met by regular subscriptions. The success of the Birmingham Society prompted a flood of other societies around the country, of which the National was one.George Elkington, The National Building Society 1849-1934, 1935, Cambridge
In 1849 The Metropolitan Freehold Land Society was formed, led by such prominent MPs as Joshua Walmsley, Joseph Hume and above all Richard Cobden. An application was made to register under the 1836 Building Societies Act but the registrar refused to accept the name. Accordingly, the name was changed to The National Permanent Mutual Building Society, with an authorization for it to be commonly called The National Freehold Land Society. Despite the building society registration and formal name, there was no doubt as to the National's function. The 1852 Prospectus clearly stated that “The special objects of this Society are to facilitate the acquisition of freehold land, and the erection of houses thereon – to enable such of its members as are eligible, to obtain the county franchise”. (The name was changed in 1894 to The National Freehold Land and Building Society and finally to The National Building Society in 1930).
The Society was not allowed to purchase land in its own name, so purchases were made by the Trustees and quickly thirteen estates were purchased around London. Within four years, the National had become the largest land society in the country. There were over 100 such societies in existence and the National claimed to be taking forty per cent of the funds. Once the plots had been purchased, the National recognized the need to provide finance for the houses that were to be built on them. In 1854 it published its first advert, inviting applications for advances “for the erection of houses on the Estates”; those advances were not to exceed two-thirds of the net value and to be repaid over ten years.
Because the Society was not legally allowed to hold land in its own name, in 1858 it formed a separate company British Land to take over all the land previously held in the name of the Trustees. All the capital was subscribed by the National's own investors but although British Land was financially distinct, there was a commonality of directors and staff. The objective was to make the National “more emphatically than it has ever been yet, a Savings Bank and Building Society.” At that point, British Land accounted for two thirds of the National's advances. The importance of British Land to the National gradually diminished although it was not until 1874 that the proportion fell to below one half;Sir Harold Bellman, Bricks and Mortals, 1949, Hutchinson after an internal row over the ownership of the National's head office, all the advances were repaid in 1878.
The repayment of the British Land loans marked the final break with the old freehold land movement and this was formalized in 1880 when the National incorporated under the Building Societies Act 1874. This gave it two important advantages: it could act under its own name and it afforded limited liability to its members, probably a comfort after the events of 1878. In that year the City of Glasgow Bank collapsed creating widespread financial uncertainty. In the event, funds flowed into the National in excess of its ability to find borrowers and it decided to deploy surplus funds in the north of England. Losses were incurred and the National confined its operations to within 100 miles of London.
Elkington described the 30 years from 1890 as a period of consolidation with the Society always in the top dozen nationally. However, in the period after WW1 there was exceptional growth both for the industry and the National in particular. Over a 15-year period the advances of the Building Societies Association rose eight-fold whereas those of the National rose by a factor of twenty.
Pre-merger: The Abbey Road Building Society
The Abbey was founded in 1874 by members of the Free Church in Abbey Road and of the Abbey Road Church Benefit Society. The chosen name of the society was the Abbey Road and St John's Wood Mutual Benefit Building Society and it was launched in 1875. Three years later the Society registered under the Building Societies Act 1874 (37 & 38 Vict. c. 42) and the name was changed to the Abbey Road and St John's Wood Permanent Building Society. In contrast to the high-profile public figures who founded the National, the start of Abbey Road was more modest. By 1888, the address was still at the schoolroom of the Abbey Road Church and the Secretary advised that he would be available on Friday evenings at his home. The early years saw rapid growth in members of the Society from 111 in that first year to over 1,000 in 1884, reaching 2,000 in 1881, 3,000 in 1901 and over 7,000 by the outbreak of WWI. A new office was eventually required in 1906.
However, even after the War, the Abbey Road “was little known outside the borough of Paddington in which it was situated” The catalyst for change was the arrival of Sir Harold Bellman, later a commanding figure in the building society sector. He joined the board of management in 1918 and became Secretary of the Society in 1921. He overhauled every aspect of the operations, introduced improvements, advertised in the national press and opened branches outside the Society's home area. By 1929, the number of members had exceeded 100,000 and these doubled in the following two years.Sir Harold Bellman, The Thrifty Three Millions, 1935, London It was in this inter-war period that Abbey overtook the National in size: in 1918, the National had £1.2m assets against Abbey Road's £0.8m whereas in 1939 Abbey's assets totalled £51m against the £36m of the National.
In 1932, the society moved into new headquarters, Abbey House, at 219–229 Baker Street, London, which it occupied until 2002. The site was thought to include 221B Baker Street, the fictional home of Sherlock Holmes,Brewer's Britain and Ireland, compiled by John Ayto and Ian Crofton, Weidenfeld & Nicolson, 2005, and for many years Abbey employed a secretary charged with answering mail sent to Holmes at that address.
The Merger
WWII brought a cessation to new housebuilding and the building societies preoccupation was supporting mortgage owners and the consequences of bomb damage to properties. By 1943, as the prospect of victory increased, the Government led discussions on post-war reconstruction. The National's Chairman, Stanley Ramsey, argued that greater scale would be needed to deal with the financial challenges of reconstruction and in 1943 he proposed a merger to the Abbey Road. The merger under the Abbey National Building Society name was implemented at the beginning of 1944 with Sir Harold Bellman as chairman and Stanley Ramsey as his deputy.Berry Ritchie, A Key to the Door, 1990, London At the time of the merger, Abbey Road was the second largest society and National, the sixth.E J Cleary, The Building Society Movement, 1965, London
Post-war Consolidation
The post-war Labour government ensured that resources for housing reconstruction was almost entirely concentrated on local authority housing, while stringent controls severely limited the private sector, the building societies’ natural market. Between 1951 and 1954, the Conservative government removed building controls and the growth in home ownership and private housebuilding resumed. However, the Society still had little more than a hundred branches and, with the pre-war management still in control, perhaps it was no longer as innovative. Eventually, 1963 saw the departure of the “old guard”: Chairman Harold Bellman died aged 76; Bruce Wycherley, general manager of the National from 1933 and chief executive of the merged group from 1948, resigned, as did Stanley Ramsey the “original architect” of the merger.
Expansion and Innovation
Abbey National was now set for rapid expansion. By 1968, the branch network had reached 150 and assets exceeded £1bn. In the next ten years the business of four other societies was acquired: the Definite Permanent in 1968, The State Building Society in 1970, Highgate Building Society in 1974 and the Oak Co-operative in 1979.Extract from Building Societies Yearbook 2009/10 (pp.126 & 152) Building Societies Association (retrieved 17 November 2009) In 1971, the Abbey was opening a branch per week and in 1974, the peak of the private housing boom, there were 335 branches and £3bn. assets. This growth could not have taken place without the increase in new private housebuilding and the expansion in home ownership that created the second-hand market; it also reflected more innovative marketing policies. This innovation reached its peak with the appointment of Clive Thornton as general manager in 1979. He led a wide range of marketing initiatives, perhaps the best known being the registration of the name "Granny Bonds" to rival the National Savings product.
Thornton was more than a passive supplier of funds to house purchasers. He took an activist approach to the housebuilding industry arguing that building societies should finance building of houses and flats to rent privately. In 1980, the Abbey set aside £250m to stimulate the private homes sector. Thornton worked with Local Authorities to finance inner city renovation, one of the best-known examples being the loan of £3m to the Stockbridge Village Trust to help regenerate 4,000 houses on a rundown council estate in Knowsley. Abbey even formed its own private housebuilding company, Abbey National Homes, in 1986. It built 2-300 houses a year but during the housing recession of 1990-92 it lost over £50m and was closed.Credit Lyonnais Laing, Private Housebuilding Annual 1997. London The range of services offered brought Abbey National ever closer to a clearing bank. In 1988, Abbey introduced a full-service interest-bearing cheque account; its administration was restricted by building society rules and the need to find a partner that could clear Abbey's cheques (The Co-operative Bank). Later, Abbey became a full member of the Bankers' Automated Clearing Services (BACS) and became member of the BACS and CHAPS clearing systems. The stage was set for Abbey to end its mutual status and become a public company.