Northern Rock To Be Sold To Virgin Money

State-owned Northern Rock is to be sold to Virgin Money for £747m.

A statement released by HM Treasury says the Government will receive £747m on the close of the sale, with the potential in the future to receive more than £1bn in total.

Those figures are considerably less than the estimated £1.4bn injected into the bank during its period of public ownership.

But Chancellor George Osborne said the sale was "the best deal for the British taxpayer" in the current economic climate - a claim supported by many city analysts.

The Treasury statement said Virgin Money had pledged as part of the deal to make no further compulsory redundancies, beyond those already announced, for at least three years.

The total number of branches will be retained and eventually expanded following the sale, the statement added, with Newcastle to become the group's operational base.

Mr Osborne said: "It was clear to us that this was the best deal for the British taxpayer, we were getting more money back than any other deal on the table.

"The sale of Northern Rock to Virgin Money is an important first step in getting the British taxpayer out of the business of owning banks.

"It represents value for money, will increase choice on the high street for customers and safeguards jobs in the North East."

Virgin Money chief executive Jayne-Anne Gadhia said the deal would create a "major new competitor" in the UK retail banking sector.

She added: "The two businesses complement each other well and together they will create a strong bank with over four million customers."

The acquisition includes 75 branches and 2,100 staff, one million customers, a £14bn mortgage book and retail deposits worth £16bn.

Sky News City editor Mark Kleinman said: "This is probably a better price than we expected.

"If you compare the price that Virgin Money is paying... to where the share prices of the big UK banks like Barclays and Royal Bank of Scotland are trading at the moment, Richard Branson is actually paying a higher proportionate value for Northern Rock.

"That's why the Chancellor will be able to say today that this is a relatively good deal for the British taxpayer at a time of absolute turmoil in the European banking sector."

Virgin Money, which was founded in 1995, has around three million customers.

Sir Richard Branson, whose Virgin Group owns Virgin Money, said: "Virgin has a history of entering new sectors to improve service and provide value for customers. We plan to do the same in banking."

Under the terms of the deal, the Government will receive £747m on completion and a further £50m within six months.

An additional £150m will be realised in the form of a financial instrument, while up to £80m will be paid if the business is sold or floated in the next five years.

The sale excludes Northern Rock Asset Management, which remains under Government ownership and holds a book of residential mortgages and unsecured loans.