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Northern Rock sold to Virgin Money | |
(40 minutes later) | |
Northern Rock is being sold to Virgin Money for £747m, href="http://www.hm-treasury.gov.uk/press_129_11.htm" >the government has announced. | |
The bank was nationalised in 2008 following its near collapse at the onset of the global credit crunch. | |
The government subsequently split the bank into two, Northern Rock plc, and Northern Rock (Asset Management), into which was placed its bad debt. | The government subsequently split the bank into two, Northern Rock plc, and Northern Rock (Asset Management), into which was placed its bad debt. |
Virgin is buying Northern Rock plc and has pledged no additional compulsory redundancies for at least three years. | |
The bank currently employs 2,500 people, down from 5,500 when it was nationalised. | |
The government said Northern Rock customers would see no change to their accounts and services and would not need to take any action. | |
BBC business editor Robert Peston said taxpayers had injected £1.4bn into Northern Rock plc. | |
He added that in addition to the immediate £747m the government will get back following the completition of the sale, there is the potential for the Treasury to receive a further £280m over the next few years. | |
"So on paper, taxpayers end up with a loss of somewhere between £400m and £650m," said our business editor. | |
The size of the losses contained in the bad bank part of Northern Rock are still uncertain, but could amount to as much as £21bn. | |
'Safeguards jobs' | |
Chancellor George Osborne 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. | Chancellor George Osborne 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." | "It represents value for money, will increase choice on the High Street for customers, and safeguards jobs in the North East." |
The sale of Northern Rock plc is expected to be completed on 1 January 2012. | The sale of Northern Rock plc is expected to be completed on 1 January 2012. |
The government said it had no plans to sell Northern Rock (Asset Management), which still owes the Treasury £21bn - the amount that was injected into the old Northern Rock bank in the wake of its near collapse. | |
Virgin Money has pledged to establish a new headquarters in Newcastle, where Northern Rock is based. | |
It also also agreed not to close any branches and instead to increase their number "as the business' growth allows". | |
In addition to paying £747m on completion of the sale, the government said Virgin Money was "expected" to pay an additional £50m within six months, and then a further £150m. | |
If Virgin Money sells or lists Northern Rock on the stock exchange in the next five years, it will have to pay the government an additional £50m to £80m. | |
'Right time' | |
Ron Sandler, Northern Rock executive chairman, said: "The return of Northern Rock to the private sector has always been one of our key objectives. | |
"We said that this would be done at the right time and when there was a proposition in the best interests of taxpayers and other stakeholders. | |
"It is a very positive outcome for the company following a significant restructuring process." | |
The Unite trade union said it hoped the announcement of the sale to Virgin Money "will be the start of a secure future" for Northern Rock's workforce. | |
A savings and mortgage bank, Northern Rock currently has more than 70 branches. | |
The bank was formed in 1997 when the former Northern Rock Building Society floated on the London Stock Exchange. | |
It was delisted following its nationalisation. |