Northern Rock nationalised – now the recovery starts
Feb 18 2008 by William Green and Adrian Pearson, The Journal
Waiting game begins for thousands of North East Rock employees
NATIONALISATION has loomed large for Northern Rock since the scale of the crisis facing the bank emerged last September, but that did not detract from the sense of shock felt when Alistair Darling announced the move at 4pm yesterday.
It was perhaps the timing that raised most eyebrows, with even those closest to this extraordinary saga caught off-guard.
BBC business editor Robert Peston – who has broken most of the major developments in this story – reported the decision on his blog less than an hour before Mr Darling addressed the Press.
What ultimately forced the Chancellor’s hand at this moment is not yet clear. But, as the major banks begin their reporting season in earnest over the next few days, we shall perhaps know more as the week progresses.
Timing is everything now, especially for the near-6,000 workers in the North East who will be fearing for their futures this morning. The Government insists it is committed to a private-sector solution for the Rock but a sale is only likely to come once market conditions improve and the truth is no-one knows when that may be.
The economy is a notoriously difficult beast to second guess at the best of times, but right now even the sharpest minds in the field can’t agree whether we’re heading for a recession, never mind when things might start to pick up again. Figures issued this week by Barclays may guide us as to how bad – or otherwise – things are. Did Mr Darling have an inkling of what was pending? It seems absurd to think he did not and that may help explain the timing of his announcement.
History has shown that nationalisation need not mean the end. How long we must wait to learn whether the Rock turns out to be a Rolls-Royce or a Railtrack remains to be seen.
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Business as usual, says new chairman
NEW Northern Rock boss Ron Sandler will meet staff today, insisting that it will be business as usual for the bank.
He promised to work with staff to “revitalise” the bank’s fortunes, but warned it is likely to be cut in size to put it on a “sustainable” footing.
He said: “We will continue to operate on normal commercial principles, both as a deposit-taker and a mortgage provider.
“On a day-to-day basis, nothing will change in terms of how we serve customers in bank branches, call centres and online as a result of the change in ownership of the bank. It is fundamentally business as usual. Public ownership has absolutely no effect on the Government guarantee arrangements which remain in place and customers’ money remains
safe.”
But he added: “It is worth pointing out that Northern Rock has grown rapidly in recent years and it is increasingly apparent that achieving the objectives that I have outlined will require returning the bank to a more sustainable size.”
The corporate troubleshooter
and former chief executive of Lloyd’s of London said Northern Rock had “considerable strengths” in an excellent workforce, supportive customers, local communities, and innovative products – and thanked the North East for its support through “difficult” times.
As the beleaguered bank’s executive chairman, it will not be the first time the Government has put its trust in Mr Sandler.
In 2001 he was appointed by then Chancellor Gordon Brown to lead a review of the long-term savings industry in the UK.
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Unconvinced reaction on the streets
THE immediate reaction to Alistair Darling’s announcement on the streets of Newcastle was mostly negative.
Audrey Charlesworth, 55, a teacher, from Tynemouth, said: “I think it’s a shame but the management of the situation has been foolish.
“As a local, I didn’t want it to go down, because I know people who have benefited from the Foundation.”
Rachel Swanston, 43, who is originally from Tyneside and now works in London, said: “The best thing would have been to let Richard Branson bail them out.
“He is a self-made man and a proven businessman and I think nationalisation will merely be a stop-gap before the next disaster.”
Dave Hardy, 32, an accountant, from Chirton in North Shields, said: “It’s
wrong.
“It should have gone commercial and it should never have been allowed to get in the state it’s in.” And Rob Hampton, 23, an events manager from London, said: “My concern is how much it has cost.
“And also whether or not the money will be returned to the Treasury or whether this is
just a very expensive way of looking after a few people’s interests.”
Angelo Moscardini, 51, a council officer, of Ballater Close, Stanley, County Durham, said: “This was inevitable, but as long as it will still be operating, it’s OK. Northern Rock has done a lot of good for the area in terms of charity work and hopefully jobs won’t be lost.”
Deidre Collingwood, 52, an administrator, from Whitley Bay, said: “I think they should have let the bank have longer to sort itself out.
“Nationalisation in most industries hasn’t done very well in the past so I think it should have gone to a tried-and-tested private buyer.”
