Darling to decide on Rock's fate within days

Reports indicate that a combination of wanting to appease MPs on their return to Parliament next week and growing pressure from the European Commission, could bounce Chancellor Alistair Darling into making an announcement, perhaps on Monday.

Sources close to the negotiations between Sir Richard Branson's Virgin Group and officials of the Tripartite Authority - the Treasury, the Bank of England and the Financial Services Authority - have indicated to the Evening Standard that talks are approaching a denouement.

Officials from the Treasury - few doubt the final decision is ultimately Darling's - have indicated Virgin is unofficially the preferred bidder so long as its current offer is sweetened with more cash on the table.

Darling is coming under increasing pressure to do a deal as Opposition leaders, both Tory and Liberal Democrat, are goading the Chancellor, accusing him of the sort of dithering that put Northern Rock in this position in the first place when the Tripartite Authority failed to act to put in a rescue plan last August and September.

With his annual set-piece Budget statement due on 12 March, Darling will also be keen to get a decision on Northern Rock and the question of whether the Government can be accused of illegal state aid. The European Commission has yet to rule on whether the Government's backing of at least £26 billion of Northern Rock debt breaches European Union subsidy laws.

At issue in the talks between the Treasury and Virgin is the fee Branson's financial backers are prepared to pay the Government for the Treasury to underwrite the £30 billion bond issue needed to refloat Northern Rock.

While Virgin believes its offer is the only acceptable choice for Darling, the Treasury is still threatening to nationalise the bank, however badly that would hit the credibility of the Government.

One source talking the Treasury's line said: "It is possible that Virgin will make its best offer but that may not be good enough and then nationalisation will be the only option."

Two outspoken shareholders who believe there remains a third way - allowing the new Northern Rock management to take its chances - are still agitating.

Jon Wood, who runs the activist hedge fund SRM from Monaco, raised his stake in the bank yesterday to more than 11%, indicating he believes a deal is still possible that, unlike Virgin's plans, will not wipe out existing shareholders.

Philip Richards, chief executive of RAB Capital, another hedge fund and Northern Rock's second-largest shareholder, said that the Treasury has been showing "extraordinary favouritism" toward Branson and scant respect for the plans forwarded by the bank's management team led by Paul Thompson.