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Crisis in the Co-op

Over the last 18 months the Co-operative group has been hit by a series of scandals, first a black hole in its finances and then the sex and drug scandal around the former Co-op Bank Chairman Paul Flewers. The repercussions have been widespread with huge upheavals within the group.

Given the origins of Usdaw’s predecessor union, AUCE in the Co-op, then the possibility of its demise will have shaken many, particularly coming at a time when the supermarket retail sector as a whole seems to be unstable.

Indeed, only 50 years ago, the Co-op had been the UK’s biggest grocer with a market share of 30%, a figure similar to the share that Tesco, the current largest retailer holds today. But since 1964, with the abolition of resale price maintainence – which had guaranteed that products had to be sold at or above a minimum price, then larger retailers who could benefit from economies of scale have become dominant, able to sell the same goods cheaper.

As a result, the market share of Co-op’s food retail business declined (although at around 6% market-share, it is still the 5th largest today), as the dividend consumers received of their share of the profits didn’t suffice to make up for the higher prices charged than the major supermarket chains. As time went on, the group’s profits were boosted by its booming finance and other services, by 2011 the Co-op Bank accounted for £200m out of the group’s £585m profit.

To keep up this trajectory, the Co-op group developed an aggressive expansion programme in the wake of the 2007-08 financial crisis. In 2009 it took over the Britannia Building Society and had a further plan to buy 600 Lloyds Bank branches and part of its mortgage business.

In the wake of the revelations of £1.5bn black hole in its finances, the Lloyds deal collapsed. The black hole largely came from bad corporate loans inherited from Britannia, but the Co-op Bank itself was guilty of mis-selling Payment Protection Insurance (PPI), with fines of £269m as a consequence. Moody’s credit ratings agency dropped its rating to junk status and £1.6bn of corporate deposits were withdrawn.

The bailout plan to recover the Co-op Group from this catastrophe has been severe. Hedge funds were brought in to inject more capital into the bank, reducing the Group’s ownership of shares now to a mere 20%. A new structure to the group has been adopted, whereby the board now has a majority of unelected appointees on it.

Additionally, the Conservative government has sought to exploit the Group’s misfortunes to politically damage the Labour Party. The Co-op established its own party around 100 years ago, which affiliated to the Labour party and has a number of joint sponsored MPs with Labour. More recently, it was the Co-op which has bailed out the Labour Party financially as its membership has declined, with a series of ‘soft loans’ to the tune of £34m since 1993.

One of the key things which has differentiated co-operative’s approach has been its attempt to have an ethical trading practice. Historically, AUCE found organising workers easier in Co-ops because of the desire of many Co-op members to treat the Co-operative’s own workers fairly. However, under the pressure of capitalist competition then even the best intentions are pushed out of the window.

Now we see the adoption within the Co-op of S3, a move to increase workforce ‘flexibility’ where workers may work a set minimum number of contracted hours but are flexible between 7am and 11pm, five days out of seven. This is very similar to the recent Ideal Scheduling brought in recently by Tesco.

The co-op crisis shows how, despite working class people having a degree of control over the business, under a capitalist system co-operatives are still subject to the pressures of that system. The struggle must go on to defend the Co-op’s remaining democratic structures and reverse those that concentrate its decisions in the hands of unaccountable speculators – but also to defend Co-op workers jobs, pay and working conditions from being made to pay for this crisis.

In the long run, only by facing up to that system and tackling it head on – by bringing into public ownership under workers democratic control and management the key sectors of the economy, such as major production, distribution and transport but also the financial sector and the major supermarket chains – can working class people fundamentally begin to control the economic forces that dominate our lives.

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  1. Xcode-op
    April 30, 2015 at 12:03 pm

    Please remember that the union isent there for the worker but for the top brass. Times have changed so much there isent any team work anymore it’s a world of dog eat dog perhaps it’s been like that for years,but funny how companies still try to tell you all about team work and how the company has so many benefits for hard work and loyalty.sorry to say nether hard work and loyalty are recognised when things go to the wall.perhaps it’s the workforce or maybe it’s the individual person that is blinded with the fear of not having that job,that thay don’t see the total picture.
    All of us forget that we all are a number on some computer screen and like the computer we can be arased when the company has come to hard times.yes the company may show that thay care but this in itself is just a procedure that thay must take.
    It’s amazing how even when management know what is coming up thay still give that impression that loyalty comes first,perhaps loyalty should start from the top,the company is run by people who are saving there own backs.so for get the word Team,loyalty,benefits,Happy staff.
    All companies no matter what thay do when times are hard thay always start by reducing the staff no matter how many years loyal you have been.
    So what’s the future going to be like,dog eat dog for that job,rights and respect go out the window,the retailer shows that thay care for the family with all there advertising about family holidays.but in reality thay are destroying the foundation of family life.Please,future young and not so young when going for that job that you are desperate for just remember that no matter how good it sounds there will always be a catch and since the union is for the company’s and not the workforce,just enjoy the moment as it want last. Enjoy your pay rise.

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