Bank 'gives Rock further bailout'

The difficulties at the Northern Rock have been well publicised

Shares in Northern Rock have fallen further, down 7.4%, on claims that the troubled lender has borrowed more money from the Bank of England.

New Star economist Simon Ward says he has calculated from the Bank's latest weekly accounts that Northern Rock has been given an additional £5bn.

This would take Northern Rock's total loans from the Bank to almost £8bn.

Both the Bank of England and Northern Rock have declined to comment on Mr Ward's report.

'Other assets'

The economist said it was his opinion that the £5bn figure was included in the bank's latest accounts under the headline "other assets", although Northern Rock is not named.

The sharp fall in confidence in September is the first clear evidence that the Northern Rock crisis has significantly affected the consumer Howard Archer at Global Insight

"It is possible that other undisclosed activities have contributed to the increase [in the Bank's assets], but the latest figures will fuel speculation that the Bank has been forced to extend massive support to the troubled mortgage lender," he said.

Northern Rock got itself into financial difficulty over the past month because unlike most UK banks, it raises the majority of its funds via the global wholesale credit market.

This market has dried up as a result of the crisis in the US sub-prime mortgage market, which has made global banks and other investors a lot more unwilling to lend to each other.

Share price fall

Northern Rock's shares ended down 7.4% to 179.2p in Friday trading in London.

Shares in the firm have lost nearly 75% of their value since it was first revealed on 13 September that it needed emergency funds from the Bank of England.

When the news of the emergency funding facility was made public it led to long queues of customers trying to withdraw their funds from its branches.

The government intervened on 17 September, when Chancellor Alistair Darling said it would guarantee all deposits held by Northern Rock.

'Losing momentum'

Meanwhile, the crisis at Northern Rock has affected UK consumer morale, a survey suggested on Friday.

Research group GFK NOP's consumer confidence measure fell to -7 in September, from August's -4 reading, worse than market expectations of a decline to -6.

When only interviews made after the Northern Rock crisis was taken into account, the figure was -9, the lowest since December 2005.

"The sharp fall in confidence in September is the first clear evidence that the Northern Rock crisis has significantly affected the consumer," said economist Howard Archer at Global Insight.

"We suspect consumer spending will lose significant momentum over the coming months."