Northern Rock on the Rocks Again

by Mark Johnston

I asked recently what the point was of continuing to keep afloat Northern Rock, why this company still around and, more to the point, when can the tax payer expect their money back from this failed group. 

It turned out that the main reason was to ensure that the UK Government and the UK tax payers all received their money back.  This seemingly is the only reason we have not chopped this company up and sold its different sections to the highest bidders.

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 week 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 have 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.”

 This is a nice statement, even better when you realise that after Ron was appointed as Chairman of Northern Rock in 2008 he received a reported £90,000 per month and has maintained his Non Domiciled status.  This Non Domiciled status ensures that ‘ol Ron pays a significantly less amount of tax at the end of each month.

Formal consultation with the union Unite has begun.

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