Northern Rock recovery builds with 8% leap

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However, analysts expected it will be taken over shortly for not much more than £1.5 billion, so the shares were not expected to go much higher. The fate of Northern Rock will also depend on how quickly and how much it draws on the emergency funding offered to it at the end of last week by the Bank of England.

With savers having withdrawn an estimated £3 billion over the past five days it is believed that chief executive Adam Applegarth could start drawing on the emergency facility as soon as today and certainly by the end of this week. A portfolio of £5 billion of mortgages has been bundled together as collateral ready to draw down the first tranche of the loan.

But with the Bank charging a punitive 7%-plus on any of the emergency facility that is used, analysts say Northern Rock will be keen to keep the amount it draws down as low as possible and repay it quickly. The Newcastle-based bank is finding it nigh on impossible to raise funds on the money markets, where rates are well below 7%.

Takeover candidates are also said to be concerned as to how long the facilities offered by the Bank and the Government will last in the event of an agreed deal. There are also signs of a growing rift between the Financial Services Authority and Bank over the crisis.

Under European Union rules, state aid for any bank can only be extended for up to six months and must be based on commercial terms. Potential bidders could be holding out for longer-term guarantees from the authorities. Questions were also being raised today as to why the Greater London Authority, Metropolitan Police, London Fire Authority and other local councils had made short-term loans to Northern Rock shortly before it was forced to seek its bailout.