Rock denies it’s to cut 2,000 jobs

NORTHERN Rock bosses last night denied reports they may have to cut 2,000 jobs because of a slowdown in new business.

NORTHERN Rock bosses last night denied reports they may have to cut 2,000 jobs because of a slowdown in new business.

The possible cuts represent a third of the bank’s 6,000-strong workforce, 5,600 of whom are based in the North-East.

The firm, which is drawing up a rescue plan for the business, has no plans for compulsory redundancies but has put in place a recruitment freeze.

Last night in response to the national newspaper speculation, a Northern Rock spokesman said: "We refute today’s misleading and unhelpful Press speculation about job cuts.

"What we can say is that we have confirmed a number of times our intention to have no compulsory redundancies, and recruitment has been frozen.

"We do expect natural staff turnover to take place over the course of time. That remains the situation and we have nothing further to add."

The bank, which is estimated to have borrowed more than £20bn from the Bank of England, has reined in its lending following the summer’s credit crunch in financial markets, hitting the growth of the business.

And the reports of the potential job cuts come as bidders circle the Rock, the UK’s fifth biggest mortgage lender.

A consortium led by Sir Richard Branson’s Virgin group wants to rebrand the company as Virgin Money.

A rival suitor, private equity firm J C Flowers, last week unveiled plans for a heavyweight management team for the company – led by former Marks & Spencer chairman Paul Myners – if it wins control of the company.

The weekend saw a third possible bidding team emerge, following reports that US financial services company GMAC was working with private equity firm Cerberus over a potential approach.

GMAC, which is 51% owned by Cerberus and 49% owned by US giant General Motors, already operates in the UK as a mortgage lender and its presence would add credibility to any potential offer.

In evidence to MPs last week, Chancellor Alistair Darling warned that Northern Rock had "a matter of weeks and months" to sort out its future.

The Government was forced to step in to guarantee Northern Rock savers’ deposits last month in a bid to end the run on the bank – a pledge later extended to include new customers of the group.

Since August, banks have become more cautious over lending due to fears of exposure to losses on high-risk US mortgages.

Northern Rock was worth more than £5bn on the stock market in February, but this has slumped to less than £1bn following the crisis.

Northern Rock shares closed last night down 0.7p at 190p, or 0.4%.


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