Rock could be nationalised
Jan 11 2008 by Adrian Pearson, The Journal
THE Government has admitted it may have to nationalise Northern Rock.
Chancellor Alistair Darling yesterday told a committee of MPs that a private sale “may not be possible” as problems in the money market were preventing a decent bid coming forward.
Mr Darling told the Treasury Select Committee that all options were open.
He said: “I would like to find a private-sector solution if that is at all possible; that may not be possible at the end of the day.
“Given the current economic conditions, which are unusual, it is not surprising that a solution that might have been available two or three years ago is not immediately available just now.”
He added it was nearing decision time for the future of the bank, which was kept afloat by a £25bn taxpayer-funded loan after facing collapse last year.
A consortium led by Sir Richard Branson’s Virgin group and the Olivant investment group are currently both bidding to rescue the bank. But the turbulent market conditions have forced Northern Rock to consider bids which would never have been accepted before the run on the bank last September.
And according to reports yesterday, the Government is understood to have given Goldman Sachs, the investment bank charged with finding finance for a takeover, the all-clear to widen the search to include cash-rich Middle Eastern governments.
But if they cannot provide the cash, the Government could have to ignore the wishes of shareholders and nationalise the bank.
Newcastle North MP Doug Henderson warned the bank’s uncertain future could see shareholders lose out completely.
“In 1971, when Rolls Royce was nationalised, the shareholders were not compensated and that is something Northern Rock shareholders may have to face up to.
“At the moment nothing is certain, we don’t know what is going to happen but it has always been the case that a private sale might not happen. Someone has to make an acceptable offer and if that does not happen, then of course nationalisation is an option.
“As for the staff, we have no way of knowing what the circumstances will be and it is impossible to predict.”
Robin Ashby, founder of the Northern Rock Small Shareholders Group, accused the Government of scaremongering.
He said: “They are quite clearly trying to threaten and abuse small shareholders into accepting their position. They are trying to get a political solution to an economic problem and we will lose out here.
“The shareholders say that if the bank is nationalised, we deserve a stake in any eventual outcome. If the Government were to nationalise the bank, then sell it on, it would be wrong for them to make a profit and overlook shareholders.”
