UK chancellor under pressure over Northern Rock

UK opposition parties will up the pressure on chancellor Alistair Darling over the Northern Rock crisis today as the company continues its search for a potential buyer.

The Bank of England has lent the beleaguered bank more than £24bn (€33.5bn) in emergency funding and Mr Darling pledged to give it breathing space to resolve its future.

He insists the support “was the right thing to do” but opposition questioned whether the taxpayer would end up paying the bill.

The outcome depends on the content of bids submitted to the UK’s fifth biggest mortgage lender.

Shares in the Newcastle-based company plummeted more than 20% yesterday after it emerged current bids were “materially below” the stock market value of the company.

In the Commons yesterday, Mr Darling pledged to retain guarantees over savers’ deposits and to protect taxpayers’ interests.

He said that the Government would have a veto over any rescue plans for the mortgage lender, which was at the centre of the UK’s first bank run for nearly 150 years in September.

Shadow chancellor George Osborne said: “This is a tale of incompetence and weak leadership from a Government that reels from one disaster to another.”

Mr Osborne claimed the rescue operation amounted to £900 (€1,259) for every UK taxpayer, and accused the Government of secrecy over the terms on which Northern Rock was borrowing its money.

Northern Rock confirmed today that there was no interest so far in a bid for the entire company, with would-be buyers interested in parts of the business or investing in the group.

And the Treasury warned that interested parties “should not assume” that the Bank of England’s emergency funding facility would be in place after February.

It also warned that bidders dependent on any extra public funding would be likely to breach European rules on state aid and “would represent a potential risk to value and execution” – due to the harsh conditions which could be imposed from Brussels.

The company, which was valued at more than £5bn (€6.9bn) in February, is now worth around £440m (€615m).

Teams who have so far expressed interest in Northern Rock include a consortium led by Richard Branson’s Virgin, and Olivant, an investment firm headed by former Abbey chief executive Luqman Arnold. Private equity firms JC Flowers and Cerberus have also looked at the UK’s fifth-biggest mortgage-lender.

Northern Rock, which has around 6,000 staff, said it expected to receive further expressions of interest over the “next few days”.

But it added: “That there can be no certainty that the discussions with interested parties will lead to an investment in or offer for the company, or for all or any part of its business.”