Morning:
8°c
Battle for Rock hots up as job cuts loom
Hugo Duncan, Evening Standard7 Feb 2008
The battle for Northern Rock intensified tonight when Virgin outlined hundreds of job losses and its main rival raised concerns about Sir Richard Branson's PR machine.
Virgin Money boss Jayne-Anne Ghadia said the job cuts were necessary after the Treasury signalled it wanted taxpayer loans to Northern Rock repaid within three years - a tighter deadline than many expected. Sir Richard had promised there would be no job cuts.
The about-turn was a blow for the Government and came as the Northern Rock management team, which is also bidding for control, voiced concern about bias towards Virgin among ministers. Paul Thompson, who would lead Northern Rock under the in-house plans, fears the Government may favour Virgin because voters see it as a household name and therefore better-placed to rescue the bank.
"I am worried," said Thompson. "I don't want them making the wrong decision just because the perception is wrong. I am not here trying to win a PR battle. I am here to make sure that the facts are right and therefore the perception is right, and then people can make the right decision for the bank, the financial community, customers, voters and the taxpayer."
It highlighted a lack of confidence in Gordon Brown and Chancellor Alistair Darling to solve the crisis. A third bidder, Olivant, led by former Abbey boss Luqman Arnold, pulled out of the race at the last minute, claiming it could not meet the three-year deadline for repaying £40 billion of Government-backed bonds to be issued by Northern Rock.
Ghadia, who would head Rock if Virgin is successful, today said: "I think the Government financing plan means that anyone who is taking the bank forward needs to think very carefully about how quickly they can repay the taxpayer. We are very confident we can make full repayment to the taxpayer within three years, and part of the solution to that is reducing the size of the bank going forward.
"There are still thousands of jobs foreseen in Newcastle. We cannot continue to make the promise that there will be no redundancies, but we would aim very much to minimise any reductions."
It is thought the successful bidder will have to shrink the mortgage book from more than £100 billion to about £60 billion. This could see up to 1000 of Northern Rock's 6500 lose their jobs although Virgin said it hoped the job losses would be far less. It is meeting unions tomorrow.
The majority of the job losses are likely to come in the Labour heartland of the North-East and could cause a bitter backlash against Brown and Darling.
Reader views (1)
Virgiin Money is not a registered bank so how can it be allowed to buy Northern Rock?
- Bethany Stephens, London, 06/02/2008 13:01
Report abuse
