The Rock no longer in a hard place
Oct 8 2008 by Peter McCusker, The Journal
NORTHERN Rock boss Ron Sandler yesterday hailed the turnaround achieved at the nationalised bank and said the North East deserved credit for playing its part in the transformation.
Mr Sandler, executive chairman of the bank, said he had enjoyed his eight months in the North East so much that he had become an “informal ambassador” for the region.
He was speaking at the annual meeting of regional development agency One NorthEast on a day when some of the UK’s leading banks suffered major falls in their share prices.
Royal Bank of Scotland, Lloyds TSB, HBOS and Barclays saw billions of pounds wiped off their value after reports that banking bosses had held a meeting with Chancellor Alistair Darling over the possibility of emergency funding.
In contrast, Mr Sandler delivered an upbeat message to the 300-strong audience about the fortunes of the Rock.
He said: “With each passing day, Northern Rock is getting back on the road to recovery. This is in no small part down to the support of the region, and the whole region deserves credit for that.
“The entire North East has been on our side, offering encouragement and terrific support and we will not let the North East down.”
He added: “I extol the virtues of the North East whenever I get the chance. I am an informal ambassador for this part of the world.”
With the bank unveiling third quarter results next week, Mr Sandler said its recent performance had been “impressive”, helped by a “huge surge” in retail deposits.
“The Northern Rock cannot take credit for this; it is a consequence of the wider financial turmoil. There has been a flight to the safety of government guarantees.
“The headlines about Northern Rock have now changed and we are now seen as a beacon of safety and stability.
“We have overcome the stigma of failure and have gone a fair way down the road to redemption. The brand is robust. We are continuing to lend money and we are still open for business.”
As reported yesterday, the Rock has now repaid more than half of the £27bn loan it took from taxpayers.
Mr Sandler said that this had been achieved by a substantial reduction in the number of mortgages on its books and by assisting borrowers to find mortgages with other lenders. The full loan would not be repaid until 2010.
In the first six months of the year the Rock reported a loss of £585m. Mr Sandler said it would be 2010/2011 before the bank made any money and that it would continue to be “extremely loss-making this year and next year”.
After last week’s news that the bank has withdrawn some of its savings deals in order to keep within its self-imposed ceiling of holding 1.5% of all national savings, Mr Sandler said there was still “headroom” for the Rock to take further deposits without breaching the limit.
But he described the global financial climate as “deteriorating” and said the global system was “in chaos”.
He said it would take a brave man to call how things would develop over the coming days and would not rule out further bank nationalisations.
Mr Sandler said the redundancy programme at the Rock was now complete and 1,500 staff had left the bank “without any disruption to its core activities”.
“I am confident that all the displaced employees have been offered jobs here in the region or elsewhere,” he said.
He said the whole process had been handled “magnificently” by the staff, the management and the union Unite, calling it a “textbook” example of how to “sensitively and respectfully” deal with mass redundancies.
Mr Sandler, who welcomed new chief executive Gary Hoffman to the Rock last week, said the new management team were all “top-drawer hires”.
“Northern Rock and the North East are joined at the hip. We’re part of the community and take that responsibility very seriously,” he said.
“The ties that bond the Northern Rock and the North East remain as strong as ever.”
Click here for an archive of stories on the Northern Rock saga
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Top men take shot at 'mission creep'
BRITAIN’S leading business organisations have blasted ministers for imposing a £34m funding cut on regional development agency One NorthEast.
The British Chambers of Commerce, CBI and the EEF manufacturers’ organisation told MPs it was vital for regional development agencies (RDAs) to be properly funded.
They praised One NorthEast but warned about “mission creep” in relation to Government plans to hand RDAs more powers amid mixed performances by agencies.
Last month, the North East Chamber of Commerce wrote to the Government expressing concern amid claims the cash is being used to subsidise housing in the South.
Giving evidence to the Commons business and enterprise committee, EEF chief economist Stephen Radley said: “We are also concerned that recent cuts in RDA budgets undermine their ability to plan ahead and the principle that their funding is ring-fenced.”
He warned ministers must not backtrack on giving RDAs the lead in developing single regional strategies – covering the economy and planning – as that would make a real economic difference.
The British Chambers of Commerce said RDAs should focus on economic growth and warned against “mission creep” with ministers imposing non-economic priorities.
“The recent decision to divert long-term funding for RDAs to housing support measures indicates that this role is still not being taken seriously enough,” it added in a submission prepared by its policy adviser Kevin Hoctor.
The report claimed there was little evidence of RDAs making a major impact, but praised One NorthEast’s economic strategy with the region operating in a much more “cohesive” way than other areas.
The CBI said ministers must ensure RDAs had the “necessary funding and skills” to take on new responsibilities.
Referring to mixed RDA performances, it said: “The experience varies across the country, for example in the North East, businesses cite generally positive experiences.
“But elsewhere business sometimes struggles to describe any meaningful engagement.”
But the groups attacked plans to give council leaders a say over regional strategies and delegate RDA funding, claiming it would have little economic benefit.
The Local Government Association said it was vital to get agreement on strategies between councils and RDAs, which had no regional democratic mandate and little or no planning expertise.
Council areas were a more appropriate level to deliver economic development, it added.
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Now the Rock could start doing B&B
NORTHERN Rock chief Ron Sandler says it may be worth considering incorporating Bradford & Bingley’s mortgage loan book into Northern Rock’s portfolio.
There has been some speculation in the media that the £41bn of residential mortgages which have fallen under Government control after its nationalisation would be divested to the Rock.
The Treasury yesterday refused to be drawn on the speculation saying that, for the next six months, the jobs of the Bradford & Bingley staff would be secure, and they would continue to operate the bank’s business.
However the long-term status of the B&B loan book has yet to be decided.
Asked if he thought the Rock may inherit this portfolio, Mr Sandler told The Journal yesterday: “That is something the Government will no doubt consider in the fullness of time.
“I do not know enough about the Bradford & Bingley’s position, but from my experience it is something that is possibly worth considering.”
One of the reasons B&B ran into trouble and was taken over by the Government were concerns over the quality of its loans.
Many are said to have been self-certified mortgages and mortgages on buy-to-let properties.
The Treasury spokesman went on to say that “it was unlikely to receive all of the £41bn as some people are likely to default”.
Click here for an archive of stories on the Northern Rock saga
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One NorthEast hits out at Government cuts
SENIOR figures from the regional development agency yesterday spoke of the challenging times ahead steering the regional economy through the global economic downturn.
One NorthEast chairman Margaret Fay and chief executive Alan Clarke were speaking at its fourth annual meeting where they unveiled ONE’s annual reports and accounts for 2007-08.
Ms Fay described the economic situation as the “most important and challenging” in its 10-year history.
“Our work has become more critical than ever and the work of the regional development agencies are now coming into sharp focus,” she said.
She reiterated the agency drive to focus on four key themes of economic development, transport, skills and climate change.
She hit out at the recent Government announcement of a £300m housing support package which will mainly be spent to support the south of England housing market.
This will lead to a 10% – or £34m – cut from ONE’s annual budget, which she described as “very disappointing”.
She added: “One NorthEast remains totally committed to working with businesses to provide the support they need in these tougher economic times and our focus will continue to be on front line services.”
Ms Fay spoke of the support being offered to businesses including the £10m emergency package launched recently and how £30m had been spent in the last year on helping business start-ups.
Mr Clarke spoke of the many bright spots in the regional economy including a 26% surge in exports. He hailed the success of the energy, oil and gas and automotive sectors, saying the region was on track to hit the 2016 target of 22,000 new start-ups.
He added: “Clearly the downturn in the economy is a cause for concern over the coming year. We may have to be more creative in approaching our investment decisions but we believe our long-term planning will pay dividends.”
