Northern Rock, one of the biggest employers in the North East, has announced that they will cut nearly 2000 jobs, amounting to  a staggering one-third of its current employees, and to reduce its mortgage lending by half. The bank has been terribly under the weather and will be forced to make these cuts by 2011 if they are to have any hope of turning things around.

Recent troubles, due to the credit crisis, led to the bank having to seek a Bank of England lifeline, and the Northern Rock was nationalised in February to fund its mortgage loan book.  It now owes the Bank of England about ₤25 billion.

Northern Rock’s rescue operation will be put under scrutiny by the European Union Commission to ensure that the aid it has received, to prevent it from going bankrupt, does not jeopardize its competitors. Even EU officials are certain that in order to be viable, Northern Rock has no alterative but to shrink.

In the meanwhile, a task force called the Northern Rock Response Group, has been formed to help the affected employees a new job. A Regional Development Agency One NorthEast is heading this response group. While acknowledging the huge blow to the dedicated task force at Northern Rock, the response group reassured affected employees stating that the skills that these employees possess are in great demand in the North East, and they hope to retain as many of them in the region as possible. They also want to make sure that no employee is made to compulsorily quit and that all the reductions in workforce will be voluntary.

The UK Shareholders Association is also due to announce legal action by Northern Rock shareholders that want compensation for the compulsory purchase of their shares by the Government.

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