Shares in the stricken bank fell almost 8% following BBC reports that both rescue deals on the table failed to match up to Government expectations.

Sir Richard Branson's Virgin consortium is ahead of a management-led team in the race for Northern Rock but the Government is prepared to nationalise the group unless it gains a better price and a bigger share in any recovery, the BBC said.

The Treasury, which was unavailable for comment on the BBC report, is backing plans to split Northern Rock's estimated £24 billion taxpayer debt into Government-backed bonds and sell it off to investors.

But it is said to want a bigger slice of the profits in return for the funding guarantees, with Prime Minister Gordon Brown prepared to go ahead with nationalisation if a deal cannot be agreed.

Shareholders of Northern Rock are opposed to the Virgin bid as it will involve cutting their stake in Northern Rock to less than half the business - although the Government has signalled that investors may get no compensation at all if it is eventually forced to nationalise the firm.

A second bid from the lender's own management is well behind Virgin in the running, the BBC added.

But opposition politicians rounded on the latest reports, with a Conservative spokesman claiming Mr Brown was being "buffeted by events".

He said: "It is clear that even after many months the Government still doesn't have a way out of this mess."

Northern Rock has been in crisis since September last year, when soaring borrowing costs forced it to seek emergency funding from the Bank of England. The revelation put the lender at the centre of the UK's first bank run for more than 140 years.