Unsavoury news from the north

May 30th, 2008

The restructuring at Northern Rock has taken a slightly sinister turn. The troubled company is to more than double the number of people who work in its debt management department over the next year, which suggests the bank is expecting to see a huge increase in the number customers who are struggling to pay their mortgages.

This is part of a program that is also going to lay off 2,000 workers by 2011. The bank’s proposals would see the workforce of about 5,485 people reduced to 3,440 over the next three years

While the large number of job losses are a result of the spectacular collapse and eventual nationalisation of the bank the increased manpower in the debt management department is entirely in keeping with current market trends.

Many mortgage lenders are expecting to see a rise in the number of customers who are struggling to meet their mortgage payments as a result of a slowing economy and the prospect of higher unemployment and higher food and fuel prices.

Northern Rock has switched its emphasis from mortgages to savings. The bank is trying to tempt savers with high interest rates and so has no plans to make cuts among staff dealing with savings. But it has already said that it wants to heavily downsize its mortgage book, from about £100bn to £50bn.

And with fewer customers expected, the number of customer service staff in its lending division will be cut from 1,152 to 478 by next year, falling to 369 by 2011.

Earlier this month, the chairman of Northern Rock told MPs that, if the business continues as now, Northern Rock would be able to repay the £26.9bn Bank of England loan by the end of 2010. The bank expects to repay about £7bn of the loan by the end of 2008.

With the problems at Northern Rock being caused by such a flawed business model it remains to be seen whether its gradual re-emergence from government ownership and boardroom changes will be enough to salvage what remains of a once impressive reputation.

This entry was posted on Friday, May 30th, 2008 at 6:04 am and is filed under Personal Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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