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Co-op bosses were like kids in a sweet shop, says Myners
THE Co-operative Group is expected to post losses as high as £2.5bn tomorrow as the mutual faces more pain from the biggest crisis in its history.
Former City minister Lord Myners, who has drawn up proposals for a major reform of the business, today pinned the blame for the disastrous figures on former managers who were allowed to run amok like kids in a sweet shop.
He said in an article in the Daily Mirror: "They bought up businesses willy-nilly - from Britannia Building Society to Somerfield supermarkets - and made catastrophically inept decisions over and over again. In the process they crippled the group with huge debt."
The acquisition spree and the cost of bailing out its banking arm have left the supermarkets-to-funerals mutual with estimated debts of 1.2 billion, while lenders are reported to be increasingly troubled by the run of boardroom disputes hampering plans to shake up its corporate structure.
The abrupt resignation of chief executive Euan Sutherland last month, amid bitter resistance to the plans of Lord Myners, has added to the turmoil.
Regional membership boards and independent societies are thought to be unhappy about proposals to abolish the vast 21-member board and replace it with what has been described as a slimmed down plc-style body to take commercial decisions.
Lord Myners has rejected the description, claiming his proposed board would be far more accountable than that of any listed company while other reforms would place increased power in the hands of its employees and eight million members.
Lord Myners said the heavy losses would mean members seeing no dividend for years to come.
"That's because those who have been managing the Co-op have let it go to the dogs," he said.
Lord Myners has announced that he is to quit the board though he will stay on until his proposals are put to members at the Co-ops annual general meeting next month.
However he told The Guardian earlier this week that he believed the possibility of the changes being accepted was quite low.
Richard Pennycook, the stand-in chief executive of the Co-op, will oversee the publication of the results tomorrow after Mr Sutherland walked out claiming the business was ungovernable.
The immediate priority for the Co-op will be to decide whether to support an additional 400 million fundraising by its banking arm, which is now under the majority control of bondholders following a rescue last year.
It still owns 30% of the bank but this stake will be diluted further if it is unable to come up with additional cash to support the rights issue.
Tomorrow's loss will reflect the scale of the crisis at the bank, which faced a £1.5 billion hole in its accounts, as well as write-downs on the value of the Co-ops acquisition of Somerfield in 2008.
In an interim review published last month, Lord Myners has said the group must take urgent steps to reform a massive failure of governance or it will go bust.