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Virgin and Rock: Jobs to go

• Robert Peston
• 6 Feb 08, 07:31 AM

Virgin has abandoned its commitment that there would be no redundancies at Northern Rock in the event that its rescue plan is approved by the Treasury.

The chief executive of Virgin Money, Jayne-Anne Ghadia, told me that job losses would be greater than the group had originally anticipated because of the Treasury's insistence that taxpayer loans have to be repaid within three years.

The Government may be embarrassed by her disclosure that job losses would stem from financial conditions imposed by the Treasury.

When Sir Richard Branson announced last year that he wanted to be Northern Rock's white knight, he said he was confident there would be no redundancies at the troubled bank.

But Jayne-Ann Ghadia, who would run the Rock for him, has had to retract that.

If Virgin were to end up controlling the bank, it would reduce staff numbers by more than could be achieved through natural attrition.

She won't be precise about it, but employee numbers may come down from 6,000 to about 5,000

Her reasons are embarrassing, for the Government.

On Friday, the Treasury told all potential rescuers that up to 拢40bn of new Government-backed bonds to be issued by the Rock would have to be repaid in between one and three years.

In order to do that, any rescuer - including Virgin - would have to massively shrink the size of Virgin's mortgage book, from more than 拢100bn to about 拢60bn.

And if the bank became that much smaller, it would need fewer people to service the mortgages.

In other words, the chancellor has decided that the priority is speedy repayment of all those taxpayer loans, even if it means job losses in Newcastle.

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