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Northern Rock sale announced by chancellor Northern Rock sold to Virgin Money
(40 minutes later)
Northern Rock is being sold to Virgin Money for £747m, the government has announced. 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 taken into public ownership in 2008 when it got itself into financial difficulty as a result of the turbulence in the global financial market. 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. Virgin is buying Northern Rock plc and has pledged no additional compulsory redundancies for at least three years.
'Safeguard jobs' 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 which was injected into the old Northern Rock bank in the wake of its near collapse. 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 committed to make "no further compulsory redundancies beyond those already announced for at least three years". Virgin Money has pledged to establish a new headquarters in Newcastle, where Northern Rock is based.
It has also 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.