It represents a significant step in returning public sector stakes in banks to the private sector, according to the Government.
It believes the sale is in the best interests of the taxpayer, secures the long-term future of the company and will increase competition in the banking sector.
This is part of the Government's wider strategy for the banking sector with safer ring-fenced banks and more competition for customers.
The combined business of Northern Rock and Virgin Money will establish a new competitor in the UK retail banking sector and, in doing so, will lead to an increase in choice for high-street customers.
It will also help increase diversity in the retail banking sector as Virgin Money seeks to innovate and expand into new market segments according to the Government.
The Government will receive £747 million in cash on closing of the sale, with the potential in the future to receive over one billion pounds in total.
The sale values the important local heritage of the company and recognises the importance of Northern Rock to the North East economy. Virgin Money has committed to:
- No further compulsory redundancies, beyond those already announced, for at least three years from completion;
- Retaining and, over time, expanding the total number of branches;
- Extending support for the Northern Rock charitable foundation for a further year; and
- Making Newcastle the operational HQ for Virgin Money.
The sale will not affect current customers of Northern Rock, which will carry on its banking as usual. They do not need to take any action and can continue to operate their accounts and contact Northern Rock as they do now. There are no changes to their terms and conditions as a result of this announcement.
The Chancellor of the Exchequer, George Osborne, said: "The sale of Northern Rock to Virgin Money is an important first step in getting the British taxpayer out of the business of owning banks. It represents value for money; will increase choice on the high street for customers; and safeguards jobs in the North East."
