Northern Rock
Rescue mission
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| DECISION REACHED: Chancellor Alistair Darling during yesterday's announcement that Northern Rock is to be nationalised |
Troubleshooter starts work today at nationalised Northern Rock
A GOVERNMENT turnaround
team starts work at Northern
Rock today after the Chancellor
finally called time on a private
sector rescue for the ailing
lender.
Emergency legislation will be
laid before Parliament today, allowing
the bank to be nationalised.
Last night, the North-East
lender's staff - including 6,000
who work in the region - were
anxiously awaiting news.
Chancellor Alistair Darling
has appointed financial troubleshooter
Ron Sandler to lead the
rescue mission.
Mr Sandler, 55, will visit Newcastle
later today for a meeting
with staff, when he is expected to
lay out his plans to stabilise the
business.
Mr Darling said the move
would be a temporary measure
with the intention to sell Northern
Rock back to the private sector
"at the earliest and most prudent
opportunity".
However, in an interview with
The Northern Echo last night he
conceded the bank might be in
public ownership for years.
He said he hoped Northern
Rock could be privatised as soon
as growth returned to the money
markets, but added: "It's not
going to end tomorrow. It will be
difficult this year, but things will
improve in subsequent years."
Mr Darling reluctantly decided
nationalisation was in the best of
interests of taxpayers when two
private sector rescue bids - by the
bank's management and Sir
Richard Branson's Virgin Group
- failed to come up to scratch.
"Under the current market
conditions" neither proposal delivered
"sufficient value for
money" to the taxpayer, said Mr
Darling.
"I have always believed that
the only long-term future the
Northern Rock has is as a private
sector bank. But the two options
on the table didn't stack up as opposed
to a temporary period of
public ownership," he said.
"That will allow a time for the
bank to be refocused and try to
regain some of its position."
Sir Richard said he was disappointed
by the decision.
"We believe nationalisation is
not the right answer and that a
commercial solution would have
been the best way forward," he
said.
The Virgin-led bid had
promised to keep job cuts to a
minimum. Now staff at Northern
Rock will have to wait to see what
nationalisation will mean for
them.
Mr Sandler admitted that the
business would have to be
slimmed down, but declined to
comment on what this meant in
terms of potential job cuts.
Nationalisation does at least
give a shot in the arm to The
Northern Rock Foundation,
which has been guaranteed £15m
a year.
Mr Darling said: "We can't substitute
everything the Northern
Rock was able to do for it, but I
hope the £15m a year will help
and give it a basis to keep going."
The UK Shareholders Association,
representing people with a
stake in Northern Rock, said it
intended to "pursue any legal options
available to it to thwart the
nationalisation process and to
ensure that fair and reasonable
compensation is paid".
Robin Ashby, of the Northern
Rock Small Shareholders' Association,
said: "Nationalisation is
never the answer to business
problems. It can only be bad news
for the company, for its employees,
for the British reputation for
financial competence and bad
news for the Northern Rock charity
and shareholders."
lan Clarke, chief executive of
regional development agency
One North East, said: "This decision
by the Government brings
welcome clarity regarding the
immediate future of Northern
Rock.
"I will be seeking the earliest possible meeting with the new
executive chairman, Ron Sandler,
to learn more about his
plans for the bank.
"It is also welcome news that
income for the Northern Rock
Foundation has been guaranteed
for the next three years, given the
outstanding contribution it
makes to the North-East."
Kevan Jones, Labour MP for
North Durham, said: "The Government
was right to look at all
the alternatives. This will now
end the uncertainty for the 6,000
people in the North-East, so this
is welcome news.
"It was a very difficult decision
and it was the right one. Looking
at the bids it is right for the taxpayers
and right for the North-
East."
But Michael Bates, deputy
chairman of the Conservative
Party, described the move as
catastrophic for the bank and the
North-East.
He said: "After four months of
dithering on this issue, the two
bids from Virgin and from the inhouse
management team have
only been there for two weeks
and I do not believe they can have
been given anywhere near due
consideration in that time but
they have leapt to this draconian
step."
7:56am Monday 18th February 2008
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