Just when it seemed things couldn’t get worse for Northern Rock, the government will tomorrow announce that it is to take control of the bank and nationalise it.
Despite looking for outside bidders, including Richard Branson’s Virgin group, to take on the debts of the Rock, they’ve decided instead to do something that they haven’t done to a company since the 1970s.
Despite dithering over a decision since the crisis began last Autumn, the government feels this decision is in the best interests for us taxpayers, and for the Northern Rock shareholders. They’ve said that this will only be a temporary measure, but I’ve heard some reports that this could be a minimum of three years. And it also looks as if there will be job cuts – although it is supposed to be “business as usual” at Northern Rock tomorrow, it will be interesting to see whether savers are eager to get their cash out again, and how happy staff there are, knowing that there are probably redundancies on the way. The Northern Rock website features the following information on the homepage, no doubt in anticipation of a deluge of interest in what happens next:
Temporary Public Ownership: What It Means For You
- The Government has announced that in the best interests of customers and taxpayers, it is taking Northern Rock into temporary public ownership.
- Customers are not affected by this change.
- Your savings with Northern Rock continue to be safe and secure, protected by the Government guarantee arrangements.
- The terms and conditions of your mortgage, savings and other products remain unchanged.
- All branches, call centres and other operations remain open for business as usual.
Shares will be suspended on the FTSE tomorrow morning, and an independent body will work out how much compensation shareholderswill be owed.
It will also be interesting to see the overall effect this has on the stockmarkets in the morning.
There’s more information on the nationalisation of Northern Rock on the BBC and Reuters, and I suspect there will be plenty more to come over the next few days.