Northern Rock slashes workforce by a quarter

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The Independent Online

Northern Rock stunned unions yesterday by announcing it would slash a quarter of its already drastically depleted workforce.

The nationalised bank said it would cut up to 680 jobs this year in an attempt to become profitable and prepare for a return to the private sector.

Northern Rock's chairman, Ron Sandler, said the market was tough for the company because mortgage demand was weak and low interest rates were squeezing margins.

He added: "In order to meet our agreed objectives, we must continue to manage our cost base, which is too big relative to the size of the company. Regrettably, this will involve job losses."

Mr Sandler said the company would avoid compulsory redundancies where possible.

Mr Sandler said earlier this month that job reductions were on the cards but the scale of the cuts took the Unite union by surprise

David Fleming, national officer at Unite, said: "Another round of brutal job cuts is simply a step too far for this workforce that has already lost a third of colleagues. We are witnessing another move to scale back this already lean organisation, in a desperate bid to find a private buyer."

Before its near-collapse in 2007, Northern Rock was a beacon for the private sector in the North-east, employing 6,500 people.

The latest round of redundancies will take the headcount below 2,000, as the region faces severe public sector job cuts.

About 1,250 jobs were moved to the Northern Rock Asset Management, "bad bank" last year when the company's safe and risky assets were split up ready to sell the "good bank".

Chi Onwurah, Labour MP for Newcastle Central, said the cuts were driven by the Government's timetable for selling off the bank.

"Uncertainty over the future of Northern Rock and these latest redundancies are a blow to the local economy at a time when the [regional] public sector is forecast to lose 40,000 jobs," she said.

"The management have been ordered to reduce the cost base in the run-up to privatisation. If management has been given short-term objectives for a quick sale, they will follow them. They need to be given longer-term objectives."

Unite and Ms Onwurah called on the Government to remutualise the former building society to give local people a stake in the only bank that is headquartered in the North-east.

Ms Onwurah said: "I think the people of the North-east should have a say in this big local employer. We have real issues with supporting the private sector in the North-east and I think the Government, which holds the largest portion of Northern Rock, should be doing more to support a local bank in the North-east."

Northern Rock announced a £232m annual loss this month. Mr Sandler said at the time that a return to profit would require increased lending, cost cuts and getting better returns on surplus liquidity.

He has insisted that there is no timetable for returning the bank to the private sector but its move back into 90 per cent mortgages and securitising loans for sale to investors are seen as steps in readying the bank for sale.