Crisis halts society’s big recruitment campaign

Oct 9 2008 by Iain Laing, The Journal

NEWCASTLE Building Society is reviewing plans to recruit 500 staff within four years after the nationalisation of two of the banks for which it works.

The society’s rapid expansion has been fuelled by contracts for back-office work for financial institutions including Bradford and Bingley (BBG) and Iceland’s Landsbanki.

The 140-year-old building society, which last July unveiled new headquarters at Cobalt Business Park in North Tyneside, says it is looking again at plans to recruit 500 staff by 2012.

But the Newcastle, which last year saw profits rise 52% to £17.6m and gross lending reach £1bn, reassured its current 1,350 employees.

Chief executive Colin Seccombe said: “Whilst this may impact on our future recruitment objectives, at this stage we don’t see the need for redundancies since we do have other contracts in the pipeline. In addition, we continue to provide a service on the Icesave and BBG contracts, since these may take some time to resolve.”

But he remains bullish about the downturn which has resulted in nationalisation of Northern Rock and the collapse of banks including Bradford & Bingley and Landsbanki, which runs the internet bank Icesave.

He said: “It is too early to say what effect current conditions might have on our overall organisational objectives in the longer term, but we continue to hold a strong portfolio of new business leads at various stages of development.

“It is important to stress that the circumstances surrounding Icesave, for whom we only provide an internet infrastructure, have no effect whatsoever on Newcastle Building Society customers. Whilst Icesave is a major contract for us, we are in a strong position and can remain strong even if we lose Icesave. We have recently secured other contracts, such as Cattles, and have further potential new contracts in the pipeline.

“As the UK’s 12th-largest building society and one of the country’s strongest mutuals, the Newcastle itself remains in a strong financial condition.”

The Government has taken steps to protect the nearly 500,000 UK savers with Icelandic banks. Chancellor Alistair Darling said no UK saver would lose as a result of Icesave’s closure if, as expected, Landsbanki was declared in default.

The Treasury has also arranged for £3bn of UK savers’ money in Icelandic banks to be transferred to ING Direct UK, a subsidiary of Dutch bank ING Direct.

ING is to acquire £2.5bn of deposits and 160,000 customers from Kaupthing Edge, thought to represent all UK operations of Iceland’s biggest bank, Kaupthing.

It is also acquiring £538m of savings held by 22,200 people with Heritable Bank, which is also part of Landsbanki and was placed in administration with Ernst & Young on Tuesday. The Heritable Bank transfer is backed with money from the Treasury and Financial Services Compensation Scheme.

The Chancellor has also frozen the assets Landsbanki holds in the UK until the bank’s future and position of UK creditors becomes clearer. The move will be a relief for savers in both groups, given the turmoil in the Icelandic bank sector.

About 300,000 UK Icesave customers were unable to reach money in their accounts and the Icelandic government said the bank would default on its obligations to UK savers.