Northern Rock will be sold to a single buyer: Osborne
A buyer for Northern Rock, the bank nationalised in 2008, will be found by the end of the year Chancellor George Osborne announced last night.
The move marks the start of the Government's "exit strategy" after buying bank shares during the financial crisis. But a gradual sell-off of stakes in Lloyds Banking Group and Royal Bank of Scotland will not start until next year at the earliest.
Mr Osborne has ruled out remutualising Northern Rock, which would bring no revenue for taxpayers. He will sell it to a single buyer rather than float it. Possible bidders including the Coventry and Yorkshire building societies, Sir Richard Branson's Virgin Money, Tesco Bank and the investment groups NBNK and Olivant.
Northern Rock's sale could raise about £1bn - less than the £1.4bn injected by the Government. It has been split into a "good bank", containing customers' savings and about 70 branches, and a "bad bank", holding the more toxic loans, which will be retained.
In his annual Mansion House speech, Mr Osborne said: "Images of the queues outside Northern Rock branches were a symbol of all that went wrong, and its chaotic collapse did great damage to Britain's international reputation. Its return now to the private sector would help to rebuild that reputation. It would be a sign of confidence and could increase competition in high-street banking."
With Lloyds set to sell 630 branches, the Treasury hopes greater competition will ensure free banking's survival.
Striking a cautiously optimistic note on the economy, Mr Osborne said: "Stability has returned. Britain is on the mend. But it is taking time."
He argued that "external shocks" such as the oil price hike, Japanese earthquake and eurozone crisis had made the recovery more difficult.
"Across the world, choppy economic waters have become choppier still. Even without these substantial headwinds, the journey the British economy has to travel would be a hard one."
A banking system which "fuelled the boom" was now "slowing the recovery from the bust," he said.
Since the recession ended, the economy has grown by 2.5% but the financial sector has shrunk by 4%.