Job losses serve as a painful reminder

Jun 9 2010 by Andrew Hebden, The Journal

THE job cuts announced by Northern Rock yesterday are a devastating and unexpected blow to the North East economy.

At a time when there is increasing concern surrounding the fate of thousands of public- sector positions in the region, this decision is particularly hard to take.

Thousands of hard-working staff who had helped the Rock turn the corner against all the odds now find their futures plunged into uncertainty once more.

There will inevitably be feverish speculation as to what lies behind this move, especially given the timing so quickly after the Government’s dire warnings this week about the need for massive cutbacks. The bank does, after all, remain in the public sector and the Government are the ultimate masters of its destiny.

Union officials and Labour politicians were quick to suggest that yesterday’s decision owes something to the new regime at the Treasury and its need to raise cash quickly.

They have, understandably, voiced concerns that the move is a precursor to the bank being sold off soon, perhaps to the detriment of its long-term future.

While this is understandable, and there is no doubt the Rock is being prepared for a sale, it would perhaps be wrong to suggest that a deal is just around the corner. Instead, the bank seems to be simply undergoing the latest phase in its reconstitution following the dramatic upheaval of the past few years.

Following the split into two businesses at the turn of the year, and the end of the 100% guarantee for savers, now the bank is aligning its resources to the needs of the business.

It should also be remembered that it is limited in terms of the amount of new work that it can take on as a result of European competition law due to its nationalised status.

And the fact is the Rock is now doing just one- fifth of the mortgage business that it was doing at its peak.

That means fewer people are needed to process this work and fewer people are needed to manage them. That is the harsh reality of life in the aftermath of a recession.

In these pages we have frequently remarked on the remarkable resilience of the Northern Rock brand and the business. Yesterday was a reminder that it’s not business as usual yet.

Andrew Hebden - The Voice of nebusiness
andrew.hebden@ncjmedia.co.uk