According to news reports, the Treasury has told the consortium led by Richard Branson’s Virgin group that they are favourites to take over Northern Rock.
However, they have advised the Virgin group to improve the terms of its rescue plan in order to make it a more attractive proposition for taxpayers. Firstly, they have asked the group to provide more money for the stricken bank, which would reflect the substantial amount of money – thought to amount to billions - that was invested in Northern Rock by the government to keep it afloat last year. The treasury have also asked for a bigger potential stake in the business, which would make it more worthwhile for taxpayers.
Despite the Treasury’s communication with the Virgin Group, a rescue bid penned by Northern Rock’s own management team is also being considered. However, the Northern Rock team has been told that their bid isn’t as strong as Virgin’s. This news comes as a bitter blow to Northern Rock shareholders, who are opposed to the Virgin proposal.
However, if the Treasury don’t decide to plump for one of these rescue bids, they might opt for nationalisation – public ownership – instead, which would make Northern Rock shareholders even unhappier.
Although the prime minister hopes that a deal with one of these parties can be agreed, he is also steeling himself for nationalisation. A banker close to the deal suggested that this is not an unlikely prospect for the struggling bank. He said: "Nationalisation is looking much more likely than it did."
Northern Rock collapsed in September last year, after pressure arising from the global credit crunch. The bank is a major employer in the Newcastle area and boasts around 6400 employees nationwide. It currently sponsors Newcastle United and has its own charity, the Northern Rock Foundation, which has raised around £190 million for good causes.
Source: BBC
Author: Beverley Bukowski
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Beverley Bukowski is a former model from Newcastle, UK. She is a keen amateur journalist and used to be a
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