Jobs on line as three dash to rescue Rock

Three bidders are expect­ed to present proposals by today’s 4.30pm deadline and a preferred bidder will be announced by the end of February.

Sir Richard Branson’s Virgin Group, investment firm Olivant, headed by ex-Abbey National boss Luqman Arnold, and Northern Rock’s own management, have indicated they will table bids today.

But fears are growing that whoever wins will be forced to take the axe to Northern Rock’s 6,500-strong workforce — because all three have based their plans on a slimmed-down business.

In addition, the Treasury is imposing restrictions, included in guidance notes sent out to potential bidders, that effectively demand the company’s cost-base is scaled down rapidly after a takeover.

The restrictions are designed to ensure that any rescue plan does not fall foul of EU rules against state aid and to avoid rival banks complaining that Northern Rock has been given an unfair advantage. They limit the amount of retail deposits the bank will be able to accept in the first three years and prevent it raising money on the wholesale money markets while it is receiving £28billion of loans from the Bank of England, due to be turned into bonds guaranteed by the Government.

David Buik at City spreadbetting firm Cantor Index rates Olivant as “uneasy favourite”.

He said: “Make no mistake — observers delude themselves if they believe that all three deals will not include some downsizing and redundancies.

“At the end of the day the Government may well be obliged to pop this ailing mortgage lender into temporary nationalisation until credit conditions improve maybe a year down the line.”

A deal will require the approval of the Treasury, the Financial Services Authority and the Bank of England, before being put to Northern Rock shareholders. If no agreement is reached nationalisation remains an option.

Northern Rock’s biggest investors, hedge funds RAB Capital and SRM Global, favour the Olivant plan.