Northern Rock nationalised

by Gill Montia

Story link: Northern Rock nationalised

Northern Rock is to be nationalised.

Today, Chancellor of the Exchequer Alistair Darling, will introduce emergency legislation to nationalise the stricken mortgage bank, ending a five-month period of uncertainty about its future.

According to the Chancellor, the decision has been taken in preference to bids by Northern Rock management and Virgin, to protect taxpayers’ interests.

However, shareholders may take legal action against the Government and this could cause deep embarrassment by exposing the decision making behind the Treasury’s rejection of an early bid for Northern Rock by Lloyds TSB.

During the nationalisation process the bank’s operations will continue as normal, with the Government’s guarantee to protect deposits remaining in place.

The move will increase public liabilities for the bank to around £91 billion and analysts expect it will be years rather than months before Northern Rock is returned to private ownership.

Ron Sandler, the former chief executive at Lloyd’s of London, will become executive chairman and will be assisted by Ann Godbehere, a Canadian accountant and insurance executive.

Failed bidder, Sir Richard Branson, has commented: “We have tried our best to save the Northern Rock and the jobs of the staff. We put all the resources of Virgin’s senior management team on this for five months and we believe had a very strong proposal, an experienced team and one of Britain’s best brands. We believe nationalisation is not the right answer and that a commercial solution would have been the best way forward.”

Northern Rock employs around 6,000 staff and job losses are expected.