A DEAL has been struck to buy the empty Northern Rock Tower. It is understood Newcastle City Council is set to borrow around £22m to buy the tower block in Gosforth.
The office complex is earmarked to house staff working for a company set up by the council with support services firm eaga, in a move which city chiefs believe will bring a massive boost to the local economy.
The city council’s decision-making executive will be asked to rubber-stamp plans to buy the tower and lease it to eaga at a meeting tonight. It is thought the purchase of the never-used building from the Rock would be the biggest property deal done by a council since the start of the economic downturn.
Barry Rowland, acting chief executive of Newcastle City Council, said: “It is important to not just sit back and wait for the upturn to come. We are using our ability to invest to secure and create jobs and stimulate growth in the wider economy and to help the city region through a very challenging time.”
The 125,000sqft tower, completed in November last year at a cost of £25m, was built to house 1,500 of the Rock’s staff.
But when the bank was nationalised and slashed its workforce from 6,000 to 4,500, the tower became surplus to requirements and no workers ever moved in.
Northern Rock bosses announced in August last year that they would be putting the 10-storey tower up for sale once it was finished.
In November it was offered for rent at £2.25m a year, with one estate agent calling it “the finest building in the North.”
Last week it was announced Northern Rock had sold its new office at Rainton Bridge, Sunderland, to npower and that the energy firm would be moving 900 staff to the new premises from Newcastle.
It is thought the city council believes it has got a good deal on the tower which it will rent to eaga on a 25-year lease.
But Newcastle’s Labour leader Nick Forbes questioned the council’s move yesterday.
He said: “What is the council doing borrowing money to speculate in property at a time when it is laying off more than 500 people? You might as well replace the executive with a decent firm of estate agents.
“There’s a huge variety of office space available to rent at a range of commercial prices.
“Do the Lib Dems really need to buy the most expensive office block in the city to put council staff in? By all accounts there will soon be a lot more space at the Civic Centre to fit all these people.”
For previous Northern Rock stories, go to www.journallive.co.uk/northernrock
2004 - Northern Rock unveils its plans for a new building to replace its seven-storey 1960s tower at Regent Centre.
June 2006 - The old tower is demolished and construction on the new building by Taylor Woodrow begins.
September 2007 - Customers queue to withdraw their savings after it is revealed the Rock has taken an emergency £3bn loan from the Bank of England. The Journal launches a campaign urging people to back the bank.
February 2008 - Northern Rock is nationalised.
August 2008 - Rock bosses announce they will be putting the 10-storey tower up for sale once it is finished.
September 2008 - The tower is put on the market.
November 2008 - The tower is offered for rent at £2.25m a year.
April 2009 - Northern Rock sells its premises at Rainton Bridge, Sunderland to npower, which announces plans to move 900 staff from Carliol House, Newcastle, to Wearside.
Thousands of jobs will be secured by council's tie-up
THOUSANDS of jobs will be secured as a result of the Northern Rock Tower deal.
It is thought at least 300 new jobs will be created and 2,000 will be secured in Newcastle.
Earlier this month The Journal reported on Newcastle City Council’s plans to link up with green support services firm eaga to tap into a £2.1bn market.
A joint company between the two hopes to capitalise on a market for contracting out services like payroll, benefits and council tax payments, IT and customer service.
Both the council and eaga will have a 50/50 share in the company and will benefit from sharing certain departments and skills. Winning contracts would also bring cash back into the council, benefiting taxpayers.
Members of the council’s executive have already approved plans for the joint company. It is thought staff from both eaga and the city council would occupy the tower.
Rent paid by eaga would be used to pay off the loan and further into the 25-year lease deal would be income for the council.
At the time the partners said they expected up to 100 jobs to be created and almost £70m of business to be won in the firm’s first two years of operations.
Alan Clarke, One North East Chief Executive and chairman of the Northern Rock Response Group, said: "Eaga is a real North East success story and their move into this high profile location is further proof of their commitment to the region and future business growth.
"As chairman of the Northern Rock Response Group, I’m especially pleased to see the tower building being put to such good use and I applaud Newcastle City Council for its foresight and commitment in securing this quality office location."
The city council is currently undergoing a "Corporate Transformation Programme" which aims to shed 510 posts at the council to save cash.
The Newco scheme will also secure jobs at City Service, the council’s financial and customer service arm, which is under pressure to improve its efficiency and to win contracts to provide services for other private sector organisations and potentially private companies.
THE sale of the Rock’s Rainton Bridge office in Houghton-le-Spring was confirmed earlier this month.
Northern Rock struck a deal to sell the brand new block to npower.
And the energy firm announced it would move 900 call centre staff to the premises from its offices in Newcastle city centre.
Union leaders criticised the decision, saying workers who live north of the Tyne had not been told about their move from Carliol House.
Last night Newcastle’s Labour leader Nick Forbes said: "Why on earth didn’t the council offer npower office space in the Northern Rock Tower? I think that was a missed opportunity to keep jobs in the city.
"Now 5,000 jobs have been lost from Newcastle as a result of the Liberal Democrat council’s incompetence."
The Rainton Bridge sale was rumoured to be the biggest property deal in the region for a decade, though neither Northern Rock nor npower would say how much it was worth.
Now it is thought the city council’s buy-up of the Northern Rock Tower could be the biggest property deal made by a council since the economic downturn began.