Page last updated at 18:13 GMT, Sunday, 3 August 2008 19:13 UK

Rock retains North East support

By Bill Wilson
Business reporter, BBC News

Customers queue to withdraw their savings from Northern Rock's Kingston branch
The queues outside Northern Rock branches showed the scale of the crisis
The recent news that troubled bank Northern Rock is to shed 1,300 jobs brings down the curtain on a rollercoaster year of turmoil for the Newcastle-based institution.

Twelve months ago its share price had started to slide amid concerns about its business model, which was heavily based on borrowing money from the wholesale banking markets in order to provide its mortgages.

But worse was to come, and the nadir came last September when fallout from the US sub-prime mortgages crisis saw credit tightening, and Northern Rock was no longer able to find funds to provide its loans.

Chancellor Alistair Darling was forced to guarantee all deposits in Northern Rock bank accounts as it share price fell further, and thousands of customers queued to withdraw their savings.

Following the first run on a British bank in more than a century, Northern Rock was eventually nationalised in February this year.

Show of support

Peter Montellier, deputy editor of the North East's regional morning newspaper The Journal, was at the forefront of the battle to save the bank at the height of the crisis.

He invited the paper's readers to open accounts with Northern Rock in the belief that it was a "sound business", and he generally used the paper to rally support for the bank in the region and beyond.

Credit crunch: 9 August 2007
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The bank cited problems in the US sub-prime mortgage sector
During the following months US and European banks report losses totalling hundreds of billions of dollar
The European Central Bank pumps 95bn euros into the eurozone banking system to ease the sub-prime credit crunch
The US Federal Reserve and the Bank of Japan take similar steps

"By speaking out I hope we encouraged people to put more effort into keeping Northern Rock open," he says.

"The attitude was 'why should we take this lying down?' Also, "Northern Rock had given a lot to the community, so people wanted to give something back by showing support.

"What was interesting was that people in the region became aware of their own power.

"In previous decades there would have been the supposition that Northern Rock would have had to close and all the jobs would have to be lost."

Mr Montellier, who wrote editorials for 10 days running calling for Northern Rock to be saved describes the episode as "a little flexing of power by the region".

"Local MPs got involved in the fight, and the message was put very forcibly to the government in London.

"Of course some people were not happy, and some of the feedback we got said Northern Rock should be allowed to die.

"But you can still believe in a free market and believe it was right to save Northern Rock."

You can still believe in a free market and believe it was right to save Northern Rock
Peter Montellier, The Journal

And, although much of the finger of blame has been pointed at former chief executive Adam Applegarth, Mr Montellier attaches as much blame to the financial regulatory system.

"With hindsight, there was no sense at the time that the board was acting recklessly in any way," he says.

"It may have looked like Mr Applegarth got out at the right time, but there have been big failures in the City of London who have been generously rewarded and no-one raises criticism.

"There has been a lot of hot air around Northern Rock. In my opinion the FSA checks were not stringent enough - they failed to look closely enough at Northern Rock."

Cultural role

As well as being a major employer in the area, one of the reasons for the company's high profile is through the Northern Rock Foundation.

It has distributed 175m over the past ten years to good causes around the North East and has permission to distribute 15m for each of the next three years.

I think the rest of the country did not quite realise how important it [Northern Rock] was to the region
Graham Goddard, Unite

Northern Rock is also a backer of local sports teams, sponsoring Newcastle United football club and Newcastle Falcons rugby club.

"There are a lot of things up here where Northern Rock has played a big role in the community," says Mr Montellier.

"Things are not going to be the same on sponsorship, that is for sure."

"The football club will find other sponsors. But the question would be - what about the rugby club? Their ground is also owned by Northern Rock.

"Without backing from Northern Rock it would have to examine how it can continue. They may have to look to a more utilitarian approach with stars."

Newcastle striker Michael Owen
Northern Rock is central to Newcastle's sporting and cultural identity

Some might argue that Northern Rock itself is now having to take a more "utilitarian approach" following nationalisation.

"People in the region think nationalisation is a holding position," says Mr Montellier, "and nobody really knows where this will go next, or indeed, if Northern Rock will survive in the long term."

He adds: "I don't think we are at the 'end of the beginning' because nobody really knows where this will go.

"When the round of redundancies is completed there will be a remaining workforce of about 4,000. There are currently vacancies in the financial sector in the North East that may be able to take up some of the people who are losing their jobs."

Singled out?

Graham Goddard, deputy general secretary of union Unite - which was involved in the negotiations which resulted in 1,300 job losses - said the outcome could have been worse.

"It is a better scenario compared to the one where we might have had 5,000-plus jobs going," he says.

"We think the lobbying of politicians and the chancellor was helpful, and I also believe that going into nationalisation saved the company."

However, he says that the rather drawn-out period while private suitors for Northern Rock were scrutinised was stressful and caused worry to staff.

Northern Rock staff show their support for the company
Unions say the region fought its corner to help keep the bank alive

"However we can now look to the future - it is important to focus on that from both a commercial and morale point of view," he stresses.

"One of the things we found out about Northern Rock was how much people in the region looked at it as though it was their business. It is a big part of the North East.

"It is part of the regional culture - the regional MPs recognised that was the case, as much as the value of the company. Job losses had to be kept to a minimum.

"I think the rest of the country did not quite realise how important it was to the region."

However, a year on bigger names than Northern Rock, both at home and abroad, have been brought low by the sub-prime crisis and credit crunch.

"The case of Northern Rock has been overshadowed by what has come afterwards," says The Journal's Mr Montellier.

"But there is still a lot of anger here about why it only seemed to be Northern Rock in the spotlight. Why was Northern Rock hung out to dry?"

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