THE North-East’s biggest charity is expected to close after it failed to raise cash from local businesses, but its sole funder has pledged £1m to regional good causes.

Talks between the Northern Rock Foundation and potential backers have been unable to find the £3m-a-year the Foundation said it needed to fund its work.

Virgin Money took over Northern Rock in the wake of the banking crash, and inherited responsibility for the Foundation, which has handed out more than £200m to good causes over the past 17 year.

In May, the Newcastle-based bank said it was willing to inject £1m-a-year into good causes via the Foundation as long as other North-East companies made up the £3m annual shortfall.

At the time, Virgin boss Sir Richard Branson issued a blunt message to Foundation bosses when he urged them to “get of their a*** and prove themselves.”

In a statement this morning, the Northern Rock Foundation said: “It is with deep regret that, after 17 years of grant making, Northern Rock Foundation will close its current grant programmes at the end of 2014 and begin to prepare for the Foundation’s now likely eventual closure.”

Virgin confirmed it would honour its pledge with an initial charitable investment of £1m in 2015 to help young people in the North-East.

The Northern Echo:

A total of £850,000 will help charity OnSide establish the first Youth Zone in the region; a new £150,000 grant-giving fund to be set-up with The Community Foundation (Tyne & Wear and Northumberland) to help young people realise their potential, and discussions are taking place on a proposed new housing regeneration scheme with Newcastle City Council.

The Northern Rock Foundation added: “In May 2014 Virgin Money made a generous offer to the Northern Rock Foundation of £1 million per year for five years, to be matched by the Foundation raising £3 million per year from the private sector locally.

“This was considered very seriously by the Foundation’s trustees. Virgin Money and Northern Rock Foundation together looked at many different ways in which this offer could help to generate an income for the Foundation including reviewing the current funding environment and canvassing views from private, public and voluntary sector bodies. Eventually it was concluded that, given the existing charitable commitments and links with other local funders of many other businesses in the region, this was not a viable option for the Foundation.

“Trustees believe there are now no funding routes left to pursue, (although they would be open to viable approaches) and will therefore proceed with the scaling down of the Foundation's work.

“The Foundation’s remaining funds will be used to achieve long term positive impact on the lives of children andyoung people in the region, and also to support the development and sustainability of voluntary organisations. Trustees will decide on their final plans in the following months, but we are pleased to announce now our intention to support the opening of a Youth Zone project in the north east, and will be working with Sir Peter Vardy and the charity Onside Youth Zone, alongside Virgin Money, to achieve this.”

Jayne-Anne Gadhia, Virgin Money chief executive said: “We are serious about our commitment to the North East community and today’s announcement will see us invest in the future of young people in the region. “We are excited to be working alongside the Northern Rock Foundation to support the creation of the North East’s first Youth Zone, which will benefit young people in the region for generations to come. “We are also delighted to be extending our long-standing relationship with The Community Foundation, to help young people realise their potential, and I am looking forward to opening the grant application process in January 2015.

“Virgin Money takes its social responsibilities very seriously in all of the communities in which we operate as we seek to deliver on our ambition to make everyone better off. We are grateful to all of the organisations we are working with for helping us to deliver on this ambition in the North-East.”

Region reacts to news of the closure

Chi Onwurah, MP for Newcastle Central said: “I’m very sad to see the demise of Northern Rock as a grant giving organisation. It has made a remarkable contribution to the North-East for many years now and has been a caring, innovative, inclusive and supportive friend to the North-East, rooted in our region and working in our region.

“I do however welcome Virgin Money’s commitment to investment in the region. Youth services have been devastated by central government funding cuts and housing is consistently the number one issue in my surgeries and post bag, so their support for North-East Youth Zones and bringing empty housing back into use is very welcome.”

“I am concerned however that the work the Foundation undertook on hard to reach communities, inclusion and refugees will not be replaced and will leave a gap in the region.”

Sir Peter Vardy, who is championing OnSide Youth Zones across the North East said: "We're absolutely delighted to receive the commitment from Virgin Money and Northern Rock Foundation to help make our dream of bringing the first Youth Zone to the North East a reality.

“Youth Zones are more than just buildings, they provide young people with the right opportunities to realise their potential. This project represents an investment in young people, demonstrating our belief that they deserve the best, and ultimately it is an investment in the future of the North East itself."

Rob Williamson, The Community Foundation (Tyne & Wear and Northumberland) Chief Executive said: “With this extra support through the Virgin Money Fund, we will be able to support vital local organisations which help make a tangible and positive difference to people’s lives. We are looking forward to getting started in early 2015.”

Leader of Newcastle City Council, Councillor Nick Forbes, said: “We are keen to work with partners to develop housing which is currently unused; turning empty properties into homes tackles our housing shortage and revitalises communities. While our discussions with Virgin Money on this project are at an early stage, talks so far have been very promising and we are looking forward to seeing what we can bring to fruition together, here in Newcastle.”