Rock shareholders outline legal bid

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The UK Shareholders Association, which has been advising Northern Rock shareholders, noted on its website that shareholders "will have to resort to legal action to establish their proper rights and to gain fair redress for the confiscation of their property".

The moves come as the head of the newly-nationalised mortgage lender is on a collision course with unions after the company announced plans to axe more than 2,000 jobs.

The group is set to cut a third of its workforce of just over 6,000 under proposals to halve the size of the firm and pay back around £25 billion in Bank of England loans racked up since its crisis last September.

Executive chairman Ron Sandler said any job losses were "extremely regrettable", but did not rule out compulsory redundancies.

Most of the cuts will come this year, striking a blow to the Newcastle-based lender's north-east heartlands.

Union leaders said the news would cause further uncertainty for the workforce and would oppose any compulsory redundancies.

Graham Goddard, deputy general secretary of Unite, said: "The employees have already faced months of insecurity and anxiety about their future. We will be working to mitigate the implications of the recent crisis on the employees who have worked tirelessly to ensure there is a sustainable business in the future."

As well as the job cuts, Northern Rock plans to shrink the size of its mortgage book to around half the current level of around £110 billion in a bid to create a smaller business, focused on low-risk mortgage lending and building up savings deposits.

It aims to pay off the Bank loans and free the Government from its guarantees over the business within three to four years before a return to the private sector.