Northern Rock put up for sale by George Osborne

NORTHERN Rock was last night put up for sale by Chancellor George Osborne.

Northern Rock

NORTHERN Rock was last night put up for sale by Chancellor George Osborne.

He said the sale process would be “open” with any interested parties able to bid, including building societies. But it was unclear if there will be any guarantees on jobs, the Northern Rock name and its Newcastle headquarters.

Contenders for the business include Sir Richard Branson’s Virgin Money, the Coventry and Yorkshire building societies, investment groups NBNK and Olivant and Tesco Bank.

The Treasury is understood to be hoping to find a buyer by the end of the year, although the process could take a little longer to finalise.

The Newcastle-based bank was nationalised in February 2008 after it collapsed amid the credit crisis, sparking the first run on a UK bank for 150 years. The Government split Northern Rock in two last year, forming a mortgage and savings bank called Northern Rock Plc and Northern Rock Asset Management (NRAM) to house the more toxic loans. It is the former half – the so-called good bank – that is being prepared to return to private ownership.

Mr Osborne confirmed he was putting the bank up for sale in his annual Mansion House speech in the City of London.

“Images of the queues outside Northern Rock branches were a symbol of all that went wrong, and its chaotic collapse did great damage to Britain’s international reputation,” he said.

“Its return now to the private sector would help to rebuild that reputation. It would be a sign of confidence and could increase competition in high street banking.”

He added: “The sale process will be open and transparent and in line with state aid rules. Any interested parties can bid for it, including mutuals, which this Government is actively committed to promoting.”

Mr Osborne stressed independent advice was that a sale would make more money for the taxpayer and should be explored as a “first option”.

It would be a “very important first step” in getting the British taxpayer out of the business of owning banks, he added.

The Chancellor also backed plans to prevent a fresh financial crisis by forcing banks to erect protective “firewalls” between their retail and investment arms as part of a new regulatory system.

Newcastle Central MP Chi Onwurah, whose constituency is home to the Rock’s headquarters, urged the Chancellor to look at mutualisation rather than it being a purely financial transaction.

The Labour MP said: “I am also very worried that there don’t seem to be any guarantees on jobs, the headquarters or community links.”

Liberal Democrat peer John Shipley, former leader of Newcastle City Council, echoed those concerns and called for the Northern Rock brand name to be maintained. A Northern Rock spokesman said its main objective was returning to the private sector when it is in the best interest of taxpayers and it was continuing to explore that in partnership with UK Financial Investments – which manages Government bank stakes – and the Treasury.

Former Labour chancellor Alistair Darling said the news was a vindication of his decision to take Northern Rock into state ownership in 2008. He expressed confidence of a profit, but stressed it should be sold to increase competition.

Northern Rock earlier this year insisted it was on the road to recovery despite posting pre-tax losses of £232.4m in 2010 – but narrowing losses in the second half of the year to £92.4m, compared to £140m in the first six months.

 
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