6,500 jobs at risk as crisis deepens at Northern Rock

Fears were growing for the jobs of Northern Rock's 6,500 staff as the stricken bank prepared for another day of mass withdrawals and its future as a viable business hung in the balance.

After the once-booming mortgage lender asked for funding from the Bank of England, its only hope was to scale back its growth or sell out to a bigger parent. But with savers rushing to withdraw funds, and with the bank's reputation tarnished, it cannot survive alone. Any sale is likely to be of its loan book and little more. The collapse of Northern Rock would be a disaster for the North-east of England, where it has more than 5,500 staff and is one of the biggest and fastest-growing employers.

Northern Rock announced a hiring freeze with no forced redundancies on Friday, but a fire-sale of assets would take the matter out of management's hands.

Unite, the main union at Northern Rock, said it was seeking meetings with Northern Rock to try to ward off compulsory redundancies. In a further blow to the region, the crisis threatens the Northern Rock Foundation, which gets 5 per cent of the bank's profit each year – £28m in 2006 – to combat deprivation in the North-east and Cumbria.

Yesterday brought a day of relief for besieged branch staff after customers took out nearly £2bn in a day and a half. Today the bank is expected to face a further onslaught of withdrawals as scared savers pull out their money. Adam Applegarth, the chief executive, said yesterday that branches would stay open late today and that customers would be able to withdraw funds.

Queues at Northern Rock's branches turned to chaos on Saturday as customers clashed with each other. Staff had to give tickets to some customers so they could come back today and go to the front of the queue.

Mr Applegarth said on Friday that without money-market funds, the bank would not be able to grow as fast as in recent years and that it would have to rely on customer deposits to fund its business. But after nearly £2bn of its £24bn retail deposits were taken out in a day and a half, that looks a slim hope.

Northern Rock had to ask the Bank of England for emergency support last week after paralysis in the financial markets cut off its sources of funding. The Bank of England's backing was meant to shore up confidence in its 1.4 million savers and 800,000 mortgage customers. But instead, frightened savers besieged the bank's 76 branches and its website to withdraw money.

A takeover by Lloyds TSB fell apart early last week. Industry sources said that after the events of recent days the chances of Northern Rock being bought as a viable business are slim.

The crisis spilled further into the political arena as David Cameron, the Conservative leader, questioned how much the Treasury knew and when. Pressure also increased on the Bank of England over its handling of the crisis. The central bank has ruled out an emergency cut in interest rates or pumping in money to unfreeze the money markets, saying its job is not to underwrite reckless financial institutions. The Bank refused to move from that line by providing financial support to help Lloyd TSB or another bank buy Northern Rock. The House of Commons' Treasury Committee will question Mervyn King, the Bank of England's governor, on Thursday. Conservative MPs on the committee increasingly question the Bank's decisions, its ability to work with the Financial Services Authority (FSA), and the role of the Treasury.

The government and the FSA, the main banking regulator, continued to appeal for calm, with Alistair Darling, the Chancellor, saying Northern Rock had not used the emergency funding line. Sir Callum McCarthy, chairman of the FSA, was forced to issue a second statement in two days. "To be absolutely clear, if we believed that Northern Rock was not solvent, we would not have allowed it to remain open for business," he said.