Member Article

Virgin Money to take over Northern Rock

The Chancellor, George Osbourne has announced the sale of Northern Rock plc to Virgin Money, at a loss to the taxpayer.

Following the bank’s bail-out in 2008, it will now be taken over by Sir Richard Branson’s conglomerate in a step towards returning public sector stakes in banking, to the private sector.

While the bank has been sold at a loss, the Treasury insists it is in the best interests of the taxpayer.

They say it will secure the long-term future of the company, and create competition in the banking sector.

The deal means there will be no further compulsory redundancies, beyond those already announced, for at least three years, and all remaining branches will be retained.

Virgin Money intends to keep the bank’s operational HQ in Newcastle.

Mr Osbourne, said: “The sale of Northern Rock to Virgin Money is an important first step in getting the British taxpayer out of the business of owning banks.

“It represents value for money; will increase choice on the high street for customers; and safeguards jobs in the North East.”

The decision to proceed with the sales was based on advice from UK Financial Investments and their independent advisers.

Virgin beat competitors to the acquisition which boasts a £14bn mortgage book, a £16bn retail deposit book and over a million customers.

The NECC welcomed news of the sale, and chief executive James Ramsbotham, said: “The announcement that Northern Rock is returning to private sector ownership is a significant milestone for the company having endured three incredibly turbulent years and undergone complete restructure.

“It is extremely welcome news that new owners Virgin Money is committed to creating a new headquarters in Newcastle and has provided assurances that there will be no additional compulsory redundancies for at least three years.

“Hopefully this announcement will bring stability back to Northern Rock and help restore public confidence in the banking sector.”

Chi Onwurah, Labour MP for Newcastle Central, and Shadow Business Minister, said: “I’m pleased that the staff and familieis of Northern Rock now know their jobs are securing after four years of uncertainty and redundancies.

“I’m also pleased by the commitments Virgin Money have given to retain the HQ in Newcastle. Their Chief Executive has said to me they have great respect for the heritage and community focus of Northern Rock.”

However, she went on to express concern about the coalition’s plans to sell the bank at a £400m loss, and said that their refusal to look seriously at a cooperative model means they are out of touch with the British people’s desire for a longer term, sustainable banking model.

In a speech to the Social Market Foundation, earlier today, Ed Milliband said: “There will be serious questions asked about the deal done today to sell Northern Rock, in particular about the scale of the loss to the taxpayer.

“But whatever the right decisions about the timing of disposal, there does need to be greater competition in the market.”

This was posted in Bdaily's Members' News section by Tom Keighley .