Northern Rock finally gets a new home

The UK treasury completed its bailout purchase of Northern Rock in February 2008 and by April 2009 speculation was afoot that the UK government was looking to exit Northern Rock. It has taken two years and seven months, but finally it was announced yesterday that Virgin Money had been the successful bidder and would land its prize.

In the last couple of years many have been linked to Northern Rock, ranging from the perceived safe hands of the Coventry Building Society through to dreaded private equity players, including Blackstone and JC Flowers, and even the likes of Tesco have been linked as being an interested party.

The battle is now over and for the bargain price of just under £750m Virgin Money has pipped other genuine contenders to the post. But is this a good deal for British taxpayers we have to ask ourselves, and personally I am undecided. Virgin are paying some £400m less than the £1.1bn the British government paid to bail out Northern Rock so some would argue that Richard Branson has one again pulled off a major coup and picked up an asset, all be it a tainted asset, on the cheap. Others would argue that given the UK has such a large budget deficit that we are battling with, surely it’s better to generate some money for the treasury than none all?

For Virgin Money it is a shrewd move; whilst on the face of it they have bought a previously tainted asset, consumers have short memories if and when they are presented with competitive financial offers, which given Mr Branson’s taste for bold and bright marketing campaigns I am sure we can expect to see in relation to the newly-enlarged Virgin Money imminently.