Northern Rock Foundation forced to close after Virgin Money ends support

Virgin Money decides to no longer fund the Northern Rock Foundation leaving the organisation with no other option than to close

Sir Richard Branson, at the Virgin Money Bank on Northumberland Street, Newcastle, after the takeover of Northern Rock
Sir Richard Branson, at the Virgin Money Bank on Northumberland Street, Newcastle, after the takeover of Northern Rock

The North East’s biggest charity fund, the Northern Rock Foundation, is to close down after Richard Branson’s Virgin Money ended its regular support.

The charity said it had not managed to secure a long-term funding agreement with Virgin Money, the bank which took over nationalised Northern Rock, after suggestions that it become a nationwide body and lose its focus on the North East and Cumbria.

Before the financial collapse in 2008, the Northern Rock Foundation had a grants pot of around £25m, but an old agreement with the Rock for a 5% share of pre-tax profits was changed to just 1% by the Government, an agreement Mr Branson took over alongside £1.5m in donations.

It is understood that the Foundation turned down a proposals to work with Virgin Money to jointly fund some projects. Talks between the two sides saw a suggestion that the charity change from a regional to a national organisation, a move the trustees thought would dramatically undermine the charity’s work in the North East.

There was also a suggestion from the Foundation that it would use its reserves to keep the charity going for four years, allowing Virgin to build up a profit before starting to hand over money to a new Virgin Money Foundation, but, The Journal was told, “Virgin was not interested.”

Alastair Balls, chairman of the Foundation said: “I am disappointed, I just don’t think the Foundation fitted in with the bank’s aims, even though they had at first made clear they were prepared to support this work.”

He added: “It is very disappointing after such extensive discussions to have to accept that Virgin Money will not commit to fund the Foundation in future. Trustees are keen to ensure that our remaining funds are used to achieve significant benefit in the North East and Cumbria and we will announce our plans later this year.”

The bank last night pointed to its Virgin Money Giving website as an example of how it has helped send £250m to charities, although this service does not in itself donate any Virgin Money cash to good causes, instead helping people make their own donations.

Newcastle Central MP Chi Onwurah said the news was “an incredibly sad day for Newcastle and the North East.”

She added: “I am very disappointed that Virgin Money could not find a way of working with such an important local institution given the personal commitment to the city and the region that Richard Branson and the company emphasised as part of their bid for the bank and in subsequent exchanges.

“I am now concerned that Virgin Money’s investment in the city and region is focused entirely on entrepreneurship which, while very important, is a much narrower remit than Northern Rock’s and will engage fewer people and not necessarily those in greatest need. I will be writing to them to set out my concerns.”

Charity group the Voluntary Organisation Network North East said closure would be seen as a “sore loss” to the region.

Chief executive Jo Curry said the Foundation’s strength was that it did not shy away from less glamorous projects.

“It has been a much loved institution, not just for its generosity but in its role as a really intelligent funder. The Northern Rock foundation has never shied away from supporting less attractive causes.”

Jo Barnett, head of social enterprise at Virgin Money said: “The Northern Rock Foundation has contributed to some fantastic work here in the North East and Cumbrian regions for many years and we have been proud to support them with £1.5m of donations over the last two years. We have tried hard to find a way to continue working together on programmes that would deliver significant benefit to the region, however we have not been able to agree a way forward.

“We will continue to support the North East community strongly in a variety of ways and look forward to establishing new partnerships to deliver a range of exciting new projects.”

Northern Rock Foundation expects to spend almost £7m in 2014 as part of the closure process, on grant programmes and other projects to support charities and voluntary organisations. A large part of the remaining reserves is expected to go into a new charity loan fund to be set up later this year.

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