New funding flexibility under the 2026 reforms opens the door to growth. Whether building societies walk through it will depend on how well they combine digital convenience, trusted advice and genuine member engagement.

Key takeaways

  • The Building Societies Act 1986 (Assimilation to Company Law and Changes to Funding Limit) Order 2026 changes how certain Bank of England liquidity facilities, non-preference debt and repo transactions count toward the sector’s statutory funding limit.
  • The practical effect: more headroom for building societies to fund lending and manage liquidity than they’ve had in years, without changing the mutual model.
  • More funding capacity only becomes growth if a society can attract, engage and retain the members needed to use it, and that is a customer experience question, not a regulatory one.
  • Research shows 47% of building society members report difficulty engaging with their services, and 31% say a mobile app would make them more likely to join, a gap that limits how much of the new headroom gets converted into growth.

 

What Does the 2026 Building Societies Funding Limit Reform Actually Change?

The proposed Building Societies Act 1986 (Assimilation to Company Law and Changes to Funding Limit) Order 2026 reads, at first glance, like routine regulatory housekeeping. Most of it is: aligning aspects of mutual law with company law, and tidying up administrative processes that have needed attention for some time. But one provision buried in the detail deserves more attention than the rest of the order is likely to get.

That provision changes how certain funding and liquidity arrangements are treated when calculating the sector’s statutory funding limit. Specifically, it allows certain Bank of England liquidity facilities, secondary non-preference debt and qualifying repo transactions to be disregarded from that calculation. The mutual model itself is untouched. But for many societies, the practical effect is real: more headroom to fund lending and manage liquidity than they’ve had before.

 

More Funding Flexibility Is Only Half the Story

None of this changes what makes a building society a building society. Retail savings and member relationships remain the foundation of sustainable growth, and the reforms don’t ask societies to be anything other than member-focused organisations. What they do is create room for more ambitious growth strategies: more lending, more competition for savings balances, more capacity on the balance sheet.

The catch is that balance sheet capacity only becomes growth if a society can attract, engage and retain the members needed to use it. Increasingly, that’s a customer experience question rather than a regulatory one. Boards weighing up how to make use of the new flexibility might reasonably start closer to home, with questions like:

  • How easy is it, right now, to open a savings account from a mobile phone?
  • How effectively are members encouraged to save more, not just to open an account?
  • How personalised are our communications, beyond generic marketing?
  • How easily can a member move between a digital channel and a human adviser without repeating themselves?
  • How often do members hear from us between the major life events, not just at renewal or in a crisis?

Why Digital Banking Has Become a Growth Engine for Building Societies, Not Just an Efficiency Play

Digital banking investment used to be justified almost entirely on cost: automating manual work, cutting branch overheads, reducing the cost of servicing existing members. Those efficiency gains still matter, but they’re no longer the whole business case. A strong mobile and online banking experience does real commercial work of its own. It helps societies win new members, deepen engagement, grow savings balances, and build the loyalty that eventually shows up in retention and advocacy.

The data backs this up. Building societies hold roughly a third of the UK banking services market, but their share among 18 to 34 year-olds sits well below that, as younger members look for providers with easier, faster digital tools. Separate research has found that close to half of building society members report difficulty engaging with their society’s services, and around a third say they would be more likely to join if a mobile app were available.

“Digital banking used to save money. Now it wins members.”

 

The Winning Model Combines Digital and Branches

This isn’t a digital-versus-branch argument and treating it as one misses the point. What has always set building societies apart is trust, local relationships and human advice, and none of that disappears because a member also wants to open an account from their phone on a Sunday evening. Branches remain a core part of the building society proposition. The task for digital isn’t to replace that, but to extend it.

 

Savings Growth in Practice: What a Connected Member Journey Looks Like

Take a member who opens a savings account through the mobile app. That moment shouldn’t be where the relationship ends. It’s where it should begin. Personalised savings goals, well-timed nudges, financial wellbeing insights and communications that are actually relevant to that member can encourage the kind of regular engagement that helps them build their savings over time.

It’s a rare case where the incentives line up cleanly. The member ends up in a stronger financial position. The society gains a deeper relationship, better retention, and stronger funding growth. That alignment (member benefit and commercial benefit moving in the same direction) is what a connected customer experience looks like in practice.

The legislation doesn’t require any society to invest in digital transformation. But it strengthens the commercial case for doing so. As funding flexibility increases, the question most societies will face isn’t regulatory. It’s how effectively they can turn that new capacity into member growth, lending growth and deeper relationships. Increasingly, the answer depends on the quality of the connected customer experience they can offer.

 

The Bottom Line

Building societies have more room to grow than they’ve had in years. That much the legislation guarantees. What happens next is down to the societies themselves.

The ones that turn flexibility into growth will get three things right:

  • Retail savings and trusted advice stay the foundation, not a legacy add-on.
  • The digital experience does commercial work: winning members, not just processing them.
  • Branches and digital serve the same relationship, rather than competing for it.

The legislation creates the room to grow. A connected experience is what fills it

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