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As Catholic Building Society and Chelsea Building Society move towards merger the ramifications of consolidations between building societies should be called into question. It is hard to predict whether mergers such as this will be a good move for the building society sector and ultimately for the consumer, but it can be said in any financial sector mergers are inevitable.

Obviously consolidation reduces the choice available on the high street for the consumer. On the other hand, this might have positive effects such as a wider and more competitive range of products available to the consumer and greater levels of service through the pooling of resources.

Matthew Wyles, group executive director of non-retail for the nation's biggest building society Nationwide, which merged with Portman Building Society last year, said generally building society mergers had been a positive development for the industry.

He said: "As the banking sector has consolidated, it has become ever more important for societies to pool their resources in order to provide a credible alternative to the banks."

With the current market turmoil, Mr Wyles said scale has never been more important and it is much more likely the bigger the provider, the more likely it is to excel.

Mr Wyles said: "Clearly it is important a merger, once completed, delivers the goals upon which the merger was predicated in the first place.

"Historically the performance of the sector in this regard was patchy but, as the quality of management in societies has steadily improved, so we have seen mergers resulting in more and more tangible benefits to members."

With these in mind, Mr Wyles said there remained great potential for further consolidation within this sector. It is the smaller societies for whom the possibility of merging appears attractive at this time.

According to Vicki O'Connell, public and media relations manager for Chelsea Building Society, as these lenders are faced with more regulation and other increasing costs it is probably fair to assume some of the smaller societies may be considering merging.

However, she said: "This is by no means an indication they are struggling. In fact it is often the opposite."

Ms O'Connell said: "Our announcement that we intend to merge with the Catholic Building Society is an example of this. The Catholic has a strong customer base and plenty of ideas for the future but cost constraints have stopped them from maximising their opportunities."

"We have seen consolidation in the past and we will probably see more in the next few years. Many of the mergers that have been announced in the last few years have quoted the desire to remain mutual."

It is generally accepted the building society sector has not only successfully been able to withstand the problems facing banks at the moment, but it has in fact flourished over the years and continues to do so.

Neil Johnson, PR and policy manager for the Building Societies Association, said: "Since Bradford & Bingley demutualised back in 2000, there have been no further demutalisations and the building society sector has prospered."

Since this demutualisation, he said there have been a number of mergers between societies averaging at about one a year to build scale from each other rather than calling on shareholder's cash.

Mr Johnson said: "Crucially these have been mergers between societies meaning the building society sector may have fewer players but society assets are remaining in the sector."

"Being the thriving sector that it is, you would expect a level of merger activity. Indeed, in any business sector mergers are a regular feature of corporate life as organisations seek to respond to changing market conditions."

Clearly the market in which building societies are competing has undergone a fundamental change in the last 12 months.

However, unlike other financial institutions market changes have had much less of an effect on building societies.

Mr Johnson said: "Despite the changes in the market, societies are more than holding their own. Record savings inflows since September last year has meant problems facing other financial institutions more dependent on wholesale funding have largely passed societies by."

As a result of this building societies have, again unlike some other organisations, been able to continue lending and every society remains active in the mortgage market.

Therefore, mergers or no mergers societies are able to face the future with confidence.

Mergers cannot be ruled out in the future between building societies but in a world of identikit banks, the distinctiveness and customer choice provided by a large number of independent building societies is going to remain a feature of the mortgage and savings markets for many years to come.