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Northern Rock employees to lose jobs under takeover plans

01 February 2008 / by Rachael Stiles
Whichever of the three likely outcomes prevail for shaping the future of Northern Rock, some of the flailing bank's 6,500 employees will lose their jobs, it has been revealed.

The three bidders – Virgin, Olivant, and an in-house group led by the bank's chairman Paul Thompson – are thought to have low-risk plans ready to put into action if they are the successful candidate, which could include job losses as the company is shrunk in size and makes far less mortgage lending than it did before it was hit by the collapse of the American sub prime mortgage market last summer.

All three hopefuls will have the Government-backed bond option available to them, whereby the £28 billion Bank of England loan can be transferred into bonds which can then be sold to investors, and the profits made will be used to repay the taxpayer.

This less aggressive business plan would require a smaller injection of equity, with a figure of between £500 million and £700 million now thought to be more likely than the previous estimate of £750 million.

Sir Richard Branson and his Virgin Group are in hot water after Branson referred to the takeover as a 'bid', when in fact, it is a plan to inject liquidity into the stricken mortgage bank that was hit severely by the. "We believe we will create a very strong bank in the future and we hope to make sure the taxpayers will get all their money paid back," Branson told the press in Moscow on Thursday, Reuters reported.

Monday, February 4, marks the deadline for potential teams to make their plans known. The Chancellor, Alistair Darling, in conjunction with the Bank of England and the Financial Services Authority, is expected to make a decision regarding a successful suitor by the end of February.

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