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Northern Rock jobs under threat Fight to stop Virgin job cut plan
(20 minutes later)
Jobs at Northern Rock will be cut if Virgin Group ends up controlling the troubled bank, the BBC has learned. Northern Rock bosses and union leaders have criticised Virgin Group's plans to cut jobs at the troubled bank.
Virgin has abandoned its commitment to no job cuts because government-backed bonds to be issued by Northern Rock have to be repaid within three years. The BBC has learned up to 1000 jobs could go if the Treasury accepts Virgin's rescue proposals.
Sir Richard Branson had previously said that he was confident there would be no redundancies under a Virgin rescue. Virgin has abandoned a commitment to no redundancies because government-backed bonds to be issued by Northern Rock have to be repaid within three years.
Northern Rock's current management, who have submitted a rival rescue plan, said it will fight to prevent job cuts. Northern Rock's current management, who have submitted a rival plan, said it will fight to prevent job cuts.
Different views It's deputy chief executive David Baker, who is part of the team working on the restructuring bid, told the BBC it was "determined to get Northern Rock back on its feet".
But Virgin Money boss Jayne-Anne Ghadia, who would run Northern Rock in the event a Virgin rescue was accepted by the Treasury, has told the BBC that job losses would be greater than originally anticipated. Rival plans
"We are going to build up new business lines. That will go some way to mitigate any reduction in job losses," he said.
The chancellor has decided that the priority is speedy repayment of all those taxpayer loans, even if it means job losses Robert Peston, BBC business editor Read Robert's thoughts in fullThe chancellor has decided that the priority is speedy repayment of all those taxpayer loans, even if it means job losses Robert Peston, BBC business editor Read Robert's thoughts in full
But Virgin Money boss Jayne-Anne Ghadia, who would run Northern Rock in the event a Virgin rescue was accepted by the Treasury, told the BBC that job losses were unavoidable.
"We're confident we can make forward payment to the taxpayer in less than three years. And part of that solution is reducing the size of the bank going forwards," Ms Ghadia told the BBC."We're confident we can make forward payment to the taxpayer in less than three years. And part of that solution is reducing the size of the bank going forwards," Ms Ghadia told the BBC.
No number was put on the likely job cuts, but employee figures would probably come down from 6,000 to about 5,000, the BBC's business editor Robert Peston said. Employee figures are expected to come down from 6,000 to about 5,000.
He added: "The government may be embarrassed by her disclosure that job losses would stem from financial conditions imposed by the Treasury."
Fighting backFighting back
Reacting to the Virgin plan, Northern Rock's deputy chief executive David Baker, who is part of the team working on the bank's own restructuring said they would keep fighting to save the jobs. The Unite union is meeting with Virgin on Thursday to discuss the impact of its proposals.
Under its rescue plan, Northern Rock management would aim to build up new lines of business in order to retain staff. "The staff of the bank remain their greatest asset, it is vital that the bidders recognise this," Unite's deputy general secretary Graham Goddard said.
The Unite union is meeting with Virgin tomorrow to discuss the impact of its proposals.
"The staff of the bank remain their greatest asset, it is vital that the bidders recognise this," Unite's Deputy General Secretary Graham Goddard said.
On Friday, the government told all potential rescuers that up to £40bn of Treasury-backed bonds to be issued by Northern Rock would have to be repaid in between one and three years.On Friday, the government told all potential rescuers that up to £40bn of Treasury-backed bonds to be issued by Northern Rock would have to be repaid in between one and three years.
Shrinking mortgage book
The staff of the bank remain their greatest asset, it is vital that the bidders recognise this Graham Goddard, deputy general secretary, Unite union
In order to do that, any rescuer - including Virgin - would have to shrink the size of Virgin's mortgage book from more than £100bn to about £60bn. The smaller the business, the fewer people it would need to service them.In order to do that, any rescuer - including Virgin - would have to shrink the size of Virgin's mortgage book from more than £100bn to about £60bn. The smaller the business, the fewer people it would need to service them.
"In other words, the chancellor has decided that the priority is speedy repayment of all those taxpayer loans, even if it means job losses in Newcastle," Robert Peston said. "In other words, the chancellor has decided that the priority is speedy repayment of all those taxpayer loans, even if it means job losses in Newcastle," BBC's business editor Robert Peston said.
Important business "The government may be embarrassed by the disclosure that job losses would stem from financial conditions imposed by the Treasury," he added.
Northern Rock is a key employer in the North East and job losses could prompt a further backlash over the government's handling of the crisis at the bank. The tight repayment deadline is thought to have ruled investment fund Olivant out of the race to control the Newcastle firm.
The tight deadline is thought to have ruled investment fund Olivant out of the race to control the Newcastle firm.
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