Change at Northern Rock

by Mark Johnston

A deal was struck recently which will see Northern Rock manage 400,000 mortgage accounts on a platform from Unisys.  The holding company, tasked with managing Northern Rocks closed mortgage books, UK Asset Resolution ratified the deal in early April but the paperwork has been signed since the fourth quarter of last year. 

Northern Rock, the first card that brought the whole deck of cards crumbling down, reported a loss of £232 million recently.  The Rock is announcing more cuts and cuts of more significance in a dramatic attempt to get back into the black. This year announcing that they will remove a further 680 jobs in 2011, notably the Rock has said that these will be across all grades within the organisation.  Nice to hear that, isn’t this common practice?  Never the less, Northern Rock only has 2,600 staff so removing 680 is quite dramatic. 

Ron Sandler, the executive chairman, has given no indication of what this means in terms of the number of job losses in the future but based on the 650 staff redundancies last year, we can be assured that the number is expected to be much higher this round of redundancies.  So, this might just be the start of a new wave of redundancies, not really what the UK economy needs. 

Since 2008 there have been significant reductions in costs on the business, this, according to Ron would need to increase.  Even if this is a given, the question we should be asking is; considering the lay-offs and considering the substantial losses, why has this bank setting aside £13.1 million to pay staff bonuses? 

Helpfully, exec Ron said “Economic and trading conditions remain very challenging for a bank like Northern Rock; the mortgage market remains subdued, and the low interest rate environment continues to act as a headwind for banks and building societies primarily funded from retail savings.

“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.  “Our aim is to minimise compulsory redundancies where possible and we will offer voluntary redundancy.”  “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.”

The Unisys Financial Service system already covers Bradford and Bingly and their 300,000 accounts.  The deal struck recently doesn’t cover any future mortgages that Northern Rock acquires.

The deal covers and includes a consultancy service, the license to use the software and the data to be migrated to the UFSS and Microsoft platforms.  When this deal goes live in the fourth quarter of this year, it means that about a quarter of all the UK mortgages are held on a Unisys system

The UFSS system “will provide a flexible, robust and efficient foundation” for Northern Rock, a statement from Richard Banks, Chief Executive at UK Asset Resolutions.

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