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Northern Rock sold to Virgin Money | Northern Rock sold to Virgin Money |
(about 1 hour 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, the government has announced. |
The bank was nationalised in 2008 following its near collapse at the onset of the global credit crunch. | 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. |
Northern Rock plc will be rebranded as Virgin Money, which has pledged no compulsory job cuts for three years. | Northern Rock plc will be rebranded as Virgin Money, which has pledged no compulsory job cuts for three years. |
The bank currently employs 2,500 people, down from 5,500 when it was nationalised. | The bank currently employs 2,500 people, down from 5,500 when it was nationalised. |
Sources at Northern Rock told the BBC that there were cheers at the bank's Newcastle headquarters when the news of the Virgin Money deal was announced. | Sources at Northern Rock told the BBC that there were cheers at the bank's Newcastle headquarters when the news of the Virgin Money deal was announced. |
Taxpayer loss | Taxpayer loss |
The government said Northern Rock customers would see no change to their accounts and services and would not need to take any action. | 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. | 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 would get back following the completion of the sale, there was the potential for the Treasury to receive a further £280m over the next few years. | He added that, in addition to the immediate £747m the government would get back following the completion of the sale, there was 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. | "So on paper, taxpayers end up with a loss of somewhere between £400m and £650m," said our business editor. |
The size of the potential losses contained in the bad bank part of Northern Rock is still uncertain and it still owes the Treasury £21bn. | The size of the potential losses contained in the bad bank part of Northern Rock is still uncertain and it still owes the Treasury £21bn. |
'Safeguards jobs' | '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). | The government said it had no plans to sell Northern Rock (Asset Management). |
Virgin Money has pledged to maintain its operational headquarters in Newcastle, where Northern Rock is based. | |
It has also agreed not to close any branches and instead to increase their number "as the business' growth allows", and support Northern Rock's charitable foundation for a year. | It has also agreed not to close any branches and instead to increase their number "as the business' growth allows", and support Northern Rock's charitable foundation for a year. |
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. | 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 the combined business on the stock exchange in the next five years, it will have to pay the government an additional £50m to £80m. | If Virgin Money sells or lists the combined business on the stock exchange in the next five years, it will have to pay the government an additional £50m to £80m. |
Virgin Money chief executive Jayne-Anne Gadhia confirmed to the BBC that the bank intended to float its shares on the stock market within two to five years. | Virgin Money chief executive Jayne-Anne Gadhia confirmed to the BBC that the bank intended to float its shares on the stock market within two to five years. |
She added: "The great thing about this business combination is that the two businesses lock together very well. | She added: "The great thing about this business combination is that the two businesses lock together very well. |
"Virgin Money has credit cards, insurances and investments, and Northern Rock has mortgages, savings and current accounts. | "Virgin Money has credit cards, insurances and investments, and Northern Rock has mortgages, savings and current accounts. |
"There is no need for any jobs to be merged together, in fact this is a story for growth." | "There is no need for any jobs to be merged together, in fact this is a story for growth." |
'Message of confidence' | 'Message of confidence' |
Ron Sandler, Northern Rock executive chairman, said: "The return of Northern Rock to the private sector has always been one of our key objectives. | 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. | "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." | "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. | 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. |
The leader of Newcastle City Council, Nick Forbes, said it was "delighted that the future of Northern Rock has now been decided". | The leader of Newcastle City Council, Nick Forbes, said it was "delighted that the future of Northern Rock has now been decided". |
"The decision by Virgin Money to make Newcastle their home sends a message of confidence in our city and the wider North East," he said. | "The decision by Virgin Money to make Newcastle their home sends a message of confidence in our city and the wider North East," he said. |
Adrian Coles, director general of the Building Societies Association, said the announcement of Northern Rock's sale was a "bittersweet moment". | Adrian Coles, director general of the Building Societies Association, said the announcement of Northern Rock's sale was a "bittersweet moment". |
"On the plus side, de-nationalising this bank is a positive step. However, we would have welcomed Northern Rock's return to the mutual sector after 14 years' absence," he said. | "On the plus side, de-nationalising this bank is a positive step. However, we would have welcomed Northern Rock's return to the mutual sector after 14 years' absence," he said. |
"Northern Rock had over 100 years as a successful building society, but only 10 years as a plc bank before the queues formed outside its branches." | "Northern Rock had over 100 years as a successful building society, but only 10 years as a plc bank before the queues formed outside its branches." |
A savings and mortgage bank, Northern Rock currently has more than 70 branches. | 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. | 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. | It was delisted following its nationalisation. |
Virgin Money had approached the Treasury about making a bid for Northern Rock back in 2008, but it was rejected. | Virgin Money had approached the Treasury about making a bid for Northern Rock back in 2008, but it was rejected. |
Virgin Money is part of Sir Richard Branson's Virgin Group. | Virgin Money is part of Sir Richard Branson's Virgin Group. |