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Co-op faces uncertain future

The banking scandal at the co-perative group is casting doubt on its future. Ed Rollett investigates

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CC Photo Courtesy of Jax60 on Flickr
CC Photo Courtesy of Jax60 on Flickr

As the banking scandal continues to engulf the Co-op Group they are expected to announce losses of £2billion for 2013, the worst in the group's 170-year history.

Euan Sutherland, the group's chief executive, will tell the board this week that he intends to sell non-core operations to raise more money and move the group back to where it can compete best. One of the areas tipped for sale are the farming operations. This has 17,200 hectares across its 15 farms, which it has operated since 1896, and employs 200 people.

Another area that could be sold are the 750 Co-op pharmacies. They had revenues of £764m in 2012 but are not considered to be a core activity of the Co-op Group, as well as needing large investment to compete effectively in their industry. As a highly visible part of the Co-op their loss would be damaging to the group.

However, the sale of the farms is also likely to be an emotive topic for members. Whilst only two per cent of what is grown on them is sold directly through Co-op stores, they represent a core part of the company's philosophy of locally sourced and ethical produce.

The further decline in the fortunes of the Co-op Group illustrates too the danger of rapid growth. The ill-advised takeover of the Britannia Building Society before the financial crash loaded the Co-operative Bank with toxic debt, whilst the recent scandal that has arisen from ex-chairman Paul Flowers shows the ineptitude some of the group's board members. As part of its long-term plans to re-shape the group and reduce costs, up to 5,000 jobs could be cut within the next three years from its 100,000 staff.

Where the original 'Rochdale Pioneers' aimed to help the ordinary man, the sell-out of the Co-operative Bank to US hedge funds and recent issues will call into doubt if the modern Co-op group can stay true to its original principles. Peter Marks, the former CEO, was paid over £1m in 2012 and the total pay for the thirteen executives was in excess of £5 million.

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