Northern Rock nightmare becomes reality for third of staff
18 March 2008 / by Rachael Stiles
A third of Northern Rock's staff are likely to lose their jobs as part of the bank's plan to downsize its business and pay back it's £25 billion loan to the taxpayer.
Approximately 2,500 jobs could be lost and the bank's £113 billion mortgage book is expected to be cut in half as the nationalised bank tries to regain its footing whilst still playing by the European rules about state aid.
Brussels is expected to open a formal investigation into the aid package guaranteed to Northern Rock by the British Government, and the European banking industry has voiced its concerns that the bank could have an unfair advantage by being completely owned by the state, providing part of the reason for the job cuts.
To help those who face losing their jobs at the bank – primarily in the North East of England, a key Labour constituency – the Chancellor Alistair Darling is readying a 'rapid response' team to help them find new employment.
Slashing its mortgage business and workforce in half by offering high rates for refinancing in an attempt to drive away customers, Northern Rock is hoping to simultaneously entice savers with attractive rates to boost its deposits, which have more than halved since their pre-credit crisis levels of £24 billion.
This two-tiered plan is intended to scale back the business to comply with EU regulations, whilst also making it attractive to potential future buyers of the bank. By curtailing the mortgage book, the taxpayer could be repaid within three years.
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