A MENTAL health coalition has claimed charities will almost inevitably have to fold following the demise of the Northern Rock Foundation.

The Newcastle-based Foundation, the North-East’s biggest charity, is facing closure after talks with its sole backer, Virgin Money, failed to produce a funding deal.

In an open letter to Virgin boss Sir Richard Branson, Mental Health North East (MHNE) chief executive Lyn Boyd urges the billionaire to intervene to avoid Northern Rock leaving a “bitter and painful” legacy.

But Virgin Money quickly hit back, blaming Foundation bosses for this week’s fallout.

A spokesman said the lender was “surprised and disappointed” the Foundation did not want to pursue any of the options on the table, which he said would have involved “substantial investment” from Virgin.

Earlier this week, the Foundation claimed Virgin had selected only a “limited number” of projects for joint support, which did not include funding for the Foundation itself and did not target “priority areas of need”.

Since buying the failed Northern Rock bank out of public ownership for £747m in 2012, Virgin has donated £1.5m to the Foundation – a fraction of the funding the Foundation enjoyed from the Rock in its heyday.

But Virgin insists it will continue to support the North-East. A spokesman said it already works with more than 150 charities in the region and has helped North-East fundraisers raise more than £10m since 2009.

Ms Boyd called on Sir Richard to consider his social responsibility and public persona, to avoid being remembered as a “Gordon Gekko” character – the fictional stockbroker villain from the film Wall Street.

“The Northern Rock Foundation goes to great lengths to ensure this investment is spent prudently and wisely and the lives of many people have been transformed for the better as a result.

“What now will be the legacy of Northern Rock in our region?

"Some jobs will be lost as soon as the Foundation closes, many more jobs will be lost in the charitable sector as a result of the loss of grants from the Foundation.

“The legacy of the Northern Rock bank in the North will indeed be a bitter and painful one if this decision stands.”

The Foundation has given grants of more than £200m over the past 16 years. MHNE is a coalition of hundreds of charities and voluntary groups providing mental health services across the North-East and is based in Birtley, near Chester-le-Street.