Nationalised - now the recovery starts
Feb 18 2008 By William Green
CHANCELLOR Alistair Darling last night insisted Northern Rock has a future as a bank and could emerge stronger from temporary nationalisation.
Yesterday afternoon’s shock announcement that the bank was to be nationalised sparked fears over job losses among its 6,500 staff – many of whom are based in the North East – after new boss Ron Sandler signaled Northern Rock will be slimmed down to a more “sustainable” footing.
In a telephone call to
And when asked if, contrary to some opponents of yesterday’s move, he believed Northern Rock would survive in the long-term, he said: “I hope it has a future.”
The Chancellor stressed the bank had a high-quality mortgage book and would be returned to the private sector “when it is right to do so” as market conditions increased its value and ensured taxpayers would gain.
He declined to be drawn on potential job losses, but warned repeatedly that market conditions today are very different from when Northern Rock was
expanding so aggressively.
An independent valuer will now be appointed to decide compensation for shareholders and Northern Rock shares will be suspended ahead of the Stock Market opening today.
Last night, the bank’s new executive chairman Ron Sandler said Northern Rock had “considerable strengths” and pledged to work with staff to “revitalise” the bank ahead of meeting with workers in Newcastle today.
The Northern Rock Foundation will receive at least £15m annually from the bank in the coming years, said Mr Sandler.
Emergency legislation allowing the bank to be nationalised will be introduced into Parliament today after Ministers rejected private-sector plans from the Northern Rock board and Sir Richard Branson’s Virgin, saying they failed to meet the interests of taxpayers and would have required too high a price.
Northern Rock was forced to seek emergency Bank of England support in September after being hit by the global credit crunch – with taxpayers facing a liability of more than £40bn, although guarantees to the bank’s customers have not had to be tapped into.
Last night, North East politicians and business chiefs expressed hope that nationalisation could help rebuild the business.
Newcastle North MP Doug Henderson, in whose constituency the bank is based, said: “I know the workers will be up for this. The business should be given the support and the time to get on with the job.”
But Newcastle Central MP Jim Cousins expressed concern that nationalisation could be a “disaster” and urged the Government to ensure Northern Rock
returned to its status as one of the region’s best companies.
The Unite union, which represents staff, warned workers would be “more anxious” about their future and will meet Mr Sandler today to seek clarification of the implications of nationalisation.
Deputy general secretary Graham Goddard said: “We will be pressing for solutions that are in the best interests of the employees and the company’s future. The union is opposed to any attempt to asset-strip Northern Rock, and we will resist any compulsory redundancies.”
Liberal Democrat Treasury spokesman Vince Cable said the Government had finally made the right decision and called for an independent audit of the bank’s loans, but expressed hope of its long-term future.
But Shadow Chancellor George Osborne accused the Government of “dithering” and confirmed the Tories would not back nationalisation.
