Branson: Darling’s move is ‘not the right answer’

Sir Richard Branson questioned the Government's decision to nationalise Northern Rock as he admitted defeat after five months working on the deal.

Virgin Money was named as preferred bidder by Northern Rock in November and remained the favoured private-sector solution until yesterday, when the Government decided nationalisation was better value for the taxpayer.

Sir Richard said nationalisation was "not the right answer" and that a commercial solution would have been a better option.

He added: "All of us in the Virgin consortium are very disappointed that the Government has chosen to opt for nationalisation. We were very clear the business plan we put forward was robust, conservative but ultimately capable of rescuing the interests of all stakeholders.

"However, we must accept the decision with good grace and hope that the Rock will somehow find better fortune in the future."

A key reason for Virgin's failure was the Government's demand for the taxpayer to make a fitting return on its support for the stricken bank. The Chancellor said the hurdle for the taxpayer to share in a revival was too high because it required the equity value of Northern Rock to hit £2.7bn.

Virgin proposed giving the Government warrants over a stake in Northern Rock that would have paid out £100m to £200m when the bank's shares hit 50p. It said this amounted to the value of the equity roughly doubling over five years.

Virgin had proposed a £1bn injection at 25p a share, split equally between a rights issue and investment by the consortium. It would also have injected its Virgin Money business, which it valued at £250m. The bank's existing shares, which closed at 90p on Friday, would have dropped to around the rights issue price, valuing the equity at about £1.35bn.

People close to the negotiations stressed the risk that Virgin would have taken in investing in Northern Rock. They said negotiations between the Government and the European Commission could have delayed Virgin taking control for many months. Potential litigation from shareholders also added uncertainty to the transaction, they said.

The Government made a share in any revival of Northern Rock a key plank in its demands to bidders to ward off claims that the taxpayer's money had been used to subsidise the private sector.

The rejection of Sir Richard's proposal sets him back in his long-held ambition to take on the established UK financial services industry.

He said Virgin would now put its efforts into building up Virgin Money, which its chief executive, Jayne-Anne Gadhia, has said is performing more strongly than is understood.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

Dame Harriet Walter interview

The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links