Fears of Northern Rock sale recede – for now

Jun 15 2009 By Andrew Hebden, The Journal

NORTHERN Rock is unlikely to be returned to the private sector until the end of the year at the earliest, The Journal has learned.

Reports have suggested that the Treasury is mulling a possible sale or flotation of the Newcastle lender with Virgin mentioned as a possible suitor.

It is thought such a move would reflect well on beleaguered Prime Minister Gordon Brown, who took the decision to nationalise the troubled bank last year.

But The Journal understands this is highly unlikely to happen in the short-term as there can be no progress with a sale until a final decision is made by the European Commission on plans to provide additional state aid to the bank.

The commission needs to give its approval to the Government’s proposed £3bn injection of capital, which would allow the Rock to ramp up its lending activity again to £14bn over the next two years.

Sources close to the process suggest an initial ruling from the EC could come as early as this week, but the decision would then be subject to a month-long public consultation.

With the Brussels summer recess on the horizon, it is probable the process will not be completed until the autumn.