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| Northern Rock to be nationalised | Northern Rock to be nationalised |
| (20 minutes later) | |
| Northern Rock is to be nationalised, the BBC's business editor Robert Peston has learned. | Northern Rock is to be nationalised, the BBC's business editor Robert Peston has learned. |
| A consortium led by the Virgin group was leading bids to run the beleaguered bank, while a management buyout had also been considered. | A consortium led by the Virgin group was leading bids to run the beleaguered bank, while a management buyout had also been considered. |
| But ministers have decided that nationalisation - the first such move since the 1970s - was the only option. | But ministers have decided that nationalisation - the first such move since the 1970s - was the only option. |
| "They felt that the offers on the table did not offer enough to the taxpayer," Mr Peston said. | "They felt that the offers on the table did not offer enough to the taxpayer," Mr Peston said. |
| The decision will be a blow to the bank's shareholders - who will receive next-to-nothing in the short term for their shares Robert Peston, BBC business editor Read Robert Peston's blog | The decision will be a blow to the bank's shareholders - who will receive next-to-nothing in the short term for their shares Robert Peston, BBC business editor Read Robert Peston's blog |
| "It's a momentous moment. Nationalisation has become a dirty word associated with industrial failures of the past," he went on. | "It's a momentous moment. Nationalisation has become a dirty word associated with industrial failures of the past," he went on. |
| "Financial services, by contrast, have been considered the great British success story - so for such a seemingly growing bank to end up being nationalised is a big moment for the City and a big moment for the government." | "Financial services, by contrast, have been considered the great British success story - so for such a seemingly growing bank to end up being nationalised is a big moment for the City and a big moment for the government." |
| Northern Rock got itself into financial difficulties last year because its business model left it ill-prepared for the global credit crunch. | Northern Rock got itself into financial difficulties last year because its business model left it ill-prepared for the global credit crunch. |
| It was forced to ask the Bank of England for emergency funding, triggering the first run on a British bank in more than a century. | It was forced to ask the Bank of England for emergency funding, triggering the first run on a British bank in more than a century. |
| Nationalisation will be pushed though parliament with emergency legislation on Monday. | |
| Shares in Northern Rock will be suspended on Monday morning. | |
| Under nationalisation rules, shareholders will be offered compensation for their holding, at a level set by a Government-appointed panel. | |
| Investors could begin legal action if they are unhappy with the amount offered. | |
| Job threat | Job threat |
| UK taxpayers are now subsidising the bank in loans and guarantees to other lenders to the tune of about £55bn. | UK taxpayers are now subsidising the bank in loans and guarantees to other lenders to the tune of about £55bn. |
| The Treasury now feels that nationalisation offers the most certainty of securing these guarantees, Mr Peston said. | The Treasury now feels that nationalisation offers the most certainty of securing these guarantees, Mr Peston said. |
| It is thought that the business model it proposes will be similar to those put forward by the Virgin Group and the in-house management consortium. | It is thought that the business model it proposes will be similar to those put forward by the Virgin Group and the in-house management consortium. |
| These were likely to see a downsizing of the bank, with job cuts likely, observers say. | These were likely to see a downsizing of the bank, with job cuts likely, observers say. |
| The Treasury had already recruited the former boss of the Lloyd's of London insurance market, Ron Sandler, to lead Northern Rock, in case the bank were nationalised. | The Treasury had already recruited the former boss of the Lloyd's of London insurance market, Ron Sandler, to lead Northern Rock, in case the bank were nationalised. |
| Mr Sandler is widely regarded as having restored confidence in Lloyd's after its years in financial disarray. | Mr Sandler is widely regarded as having restored confidence in Lloyd's after its years in financial disarray. |
| He is well known to Prime Minister Gordon Brown, and worked for the Treasury in developing the so-called stakeholder pension and investment products that were intended to help those on lower incomes save for retirement. | He is well known to Prime Minister Gordon Brown, and worked for the Treasury in developing the so-called stakeholder pension and investment products that were intended to help those on lower incomes save for retirement. |
| Chairman of the Commons Treasury Select Committee John McFall said that he welcomed the Government's decision to nationalise. | Chairman of the Commons Treasury Select Committee John McFall said that he welcomed the Government's decision to nationalise. |
| "They have explored every avenue. At the end of the day the biggest issue is the safeguarding of taxpayers' money. If nationalisation saves that money, that has to be the correct step in the long term." | "They have explored every avenue. At the end of the day the biggest issue is the safeguarding of taxpayers' money. If nationalisation saves that money, that has to be the correct step in the long term." |
| Liberal Democrat treasury spokesman Vince Cable said that the right deicison had been taken, though "belatedly", and that the government should have walked away from the prospect of a private takeover some time ago. | |
| "The important thing now is to do the right thing and the government has got to immediately establish what the problems are with this bank." | |
| Have you been affected by this story? Are you a Northern Rock customer or shareholder? Send us your comments using the form below: | Have you been affected by this story? Are you a Northern Rock customer or shareholder? Send us your comments using the form below: |
| I have a mortgage with Northern Rock. What does nationalisation mean for the customers? What does it mean to the tax payer? What are "pro et contra" for both scenarios? Alex.Alex Lester, Glasgow | |
| Well, what a surprise? We are only just seeing a slowing in the U.K. housing market. What happens when house prices fall maybe 40-50% in the next 2-3 years in a worldwide recession? What then for the other banks that are in meltdown right now? We have never seen the repossession rates I expect to come and those banks/building societies heavily invested in that market will be in big trouble!Nick, Guildford | |
| Good. I hope it's permanent. The country needs a national bank as an alternative to the con-men and spivs in the commercial financial services industry.Charles Moore, Edinburgh, Scotland | |
| As a Northern Rock mortgage customer I am now concerned to see what happens. Is my mortgage going to be sold off? Will I get less favourable terms when my fixed rate mortgage expires? At a time of increasing tax, National Insurance, fuel and food prices this will cause me some sleepless nights until the way forward becomes clear.Paul Hughes, Swindon, Uk | |
| New Labour, same story .... stagflationary economics, nationalisation, burgeoning public debt & a clueless chancellor. Obviously we haven't moved that far from the late 70's......Nationalisation is a total embarasment; will the government nationalise every business that goes bust from now on? Legal president probably says they have to..ben, London | |
| ...... I have been affected by this......... I lost my job!(along with 70% of the company) ........... thanks to all press & america.. cheersRDH, dorset | |
| How will this affect my savings?SUSAN STARR, Wisbech, UK | |
| We should now all back and praise the government on taking the brave decision to nationalise, rather than taking the easy option to sell the nation short to Virgin.Simon, London, UK | |
| a £55bn loan of tax payers money may well have been a step too far; on top of subsidising the bank in loans and guarantees the tax payer will now safe guard the northern rock savers money. Why should I safe guard others savings with my income tax?Stuart Davey, Wiltshire | |
| 1. Will the nationisation of Northern Rock be accepted as a precedent for rescuing all other failing companies in any "labour heartland" or will government extend its genorousity and rescue all other failing companies at the taxpayers' expense 2. I am still of the opinion that any rescue of Northern Rock is aimed at buying votes in anticipation of a general election! Ray Milford, Taunton, Somerset, UK | |
| Why has the Virgin bid been rejected, because I personally think, workers would have had more job security if Northern Rock was merged with Virgin money.Anonymous, England | |
| Every UK taxpayer will be affected by this. Nationalisation is now a done-deal, the next question is, how much of our money is going to be used to 'compensate' the shareholders for their worthless company? None whatsoever, if justice has anything to do with it!Huw Thomas, Llandeilo | |
| Why did they take so long. Clearly the interests of British Taxpayers and the employees of Northern Rock must be paramount. The fact that shareholders will take a loss is surely a "fact of capitalist" life. I hope that shareholders will not be compensated over and above the value of their shares. That would clearly be unfair especially to those bougt when the values were depressed hoping to make a killing later.Phil, Basildon, UK | |
| Does this mean that Northern Rock will finally stop giving money to Newcastle United/Falcons? Taxpayers have been paying for NR for months and they are still sponsoring sports teams.John Murray, Chester,UK | |
| Is this the start of 'Old Labour' as Mr Brown and Mr Darling start to show their true colours? Are we in for a 'Summer of Discontent' as they lead this country into recession and return the Labour party to their flawed strategies of the 1970's? Nick Flower, Holyport | |
| Please can I have the job of running this department (inc £1m pa salary like the bloke at the PO). I have a head, two arms and a leg and therefore am as qualified as anyone in the government/civil service to run a commercial bank (after all, I couldn't do any worse). Paisley YodaPaisley Yoda, North Britain | |
| the only option an available to protect the bank and the British taxpayer . to secure onward investment and security i will invest as it is protected by govvic , westmidlands | |