State-owned Northern Rock cuts nearly 700 jobs

28th March 2011, Comments 0 comments

British bank Northern Rock, nationalised three years ago to avert financial meltdown, said Monday that it will axe almost 700 jobs by the end of 2011 as it looks to return to the private sector.

The loss-making bank said in a statement that it planned "a reduction of up to 680 jobs, affecting employees at all grades across the company. The process is expected to conclude by the end of the year."

Northern Rock, which will have a workforce of under 2,000 compared with about 6,500 in 2007 according to Britain's main union Unite, was last year broken into two parts -- "good" and "bad" banks.

"Economic and trading conditions remain very challenging for a bank like Northern Rock," executive chairman Ron Sandler said in Monday's statement.

"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."

Sandler added: "This is an unsettling time for our employees, who have been through a lot in the last few years. We will keep them well informed throughout the process and provide support to those who are affected."

Senior Unite official David Fleming expressed outrage at the latest round of cuts.

"This appalling news of 680 job cuts is scandalous. Another round of brutal job cuts is simply a step too far for this workforce that has already lost a third of colleagues," he said in a separate statement.

"We are witnessing another move to scale back this already lean organisation, in a desperate bid to find a private buyer."

Unite wants Northern Rock turned into a building society, or mutual, whereby it would be owned by the bank's depositors.

Earlier this month, Northern Rock Plc -- the lender's "good bank" -- posted a pre-tax loss of £232.4 million (271 million euros, $377 million) in its first set of annual results.

The "bad" bank, Northern Rock Asset Management, houses its toxic loans and is to be wound down. This division will unveil its annual results on Thursday.

Only Northern Rock Plc -- a mortgage and savings bank -- is to be offered for sale to the private sector.

Northern Rock collapsed in mid-September 2007 when its exposure to the credit crunch forced it to seek emergency assistance from the Bank of England, sparking the first run on a British bank in recent history.

To prevent a wider system meltdown, the government agreed in December 2007 to guarantee all customer deposits held at the struggling group, before taking the lender over in early 2008.

© 2011 AFP

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