The UK government is selling the savings and mortgages bank Northern Rock to Virgin Money for £747m. The deal will be complete in January 2012 and Virgin is expected to develop a new Newcastle HQ in order to keep the bank in the North of England.
Northern Rock was taken into public ownership in 2008, one of the first signs of the seriousness of the economic crisis. The bank was then split into two entities, Northern Rock plc (which Virgin Money is now buying) and Northern Rock (Asset Management), with the latter taking on the bank’s ‘bad loans’. The government is not planning to sell Northern Rock (Asset Management).
The sale of Northern Rock marks an opportunity for the bank to start recovering its brand image. And the deal to keep the bank’s HQ in Newcastle should help to create jobs in the North of England. Whether a Virgin Money-owned Northern Rock can take on the rest of the British banking industry, however, remains to be seen.