The head of newly-nationalised mortgage lender Northern Rock was on a collision course with unions yesterday after the company announced plans to axe more than 2,000 jobs.
The group is set to cut a third of its workforce of just over 6,000 under proposals to halve the size of the firm and pay back around £25 billion in Bank of England loans racked up since its crisis last September.
Executive chairman Ron Sandler said any job losses were "extremely regrettable", but did not rule out compulsory redundancies.
Most of the cuts will come this year, striking a blow to the Newcastle-based lender’s north-east heartlands. Union leaders said the news would cause further uncertainty for the workforce and would oppose any compulsory redundancies.
Graham Goddard, deputy general secretary of Unite, said: "The employees have already faced months of insecurity and anxiety about their future.
"We will be working to mitigate the implications of the recent crisis on the employees who have worked tirelessly to ensure there is a sustainable business in the future."
But Mr Sandler said: "This is not just about shedding jobs, this is about preserving Northern Rock as a viable financial institution capable of being returned to the private sector."
Chancellor Alistair Darling gave the European Commission formal notice of its continued support to Northern Rock, which could face an investigation for breaching rules on state aid.
A Commission spokesman said: "To be viable without state guarantees it is clear the bank must shrink."
A task force set up to help workers facing the axe also held its first meeting yesterday. The Northern Rock Response Group - led by regional development agency One NorthEast chief executive Alan Clarke - is confident that Northern Rock’s staff can help fill an estimated 21,000 vacancies in the region.
He said: "The North East economy is far more resilient than in the past to absorb such economic blows and its broader business base offers new opportunities and hope for these workers."
As well as the job cuts, Northern Rock plans to shrink the size of its mortgage book to around half the current level of around £110 billion in a bid to create a smaller business, focused on low-risk mortgage lending and building up savings deposits.
It aims to pay off the Bank loans and free the Government from its guarantees over the business within three to four years before a return to the private sector.
Although it was at the centre of the UK’s first run on a UK bank for more than 140 years when funding costs soared in last summer’s credit crunch, Mr Sandler plans to maintain the Northern Rock brand.
He said the company’s focus group evidence had shown that the Northern Rock name was "far from damaged beyond repair" although he added that money would be outlaid on "reinvigorating" the brand.
The Government was forced to guarantee 100% of savers’ deposits at Northern Rock to end the run on the bank, although this has since sparked worries from rivals over the competitive edge given to the Newcastle-based group.
Mr Sandler said the group would strike a "sensible balance" over the competition concerns.
He said: "We recognise that we are supported by the Government but we don’t want to abuse that support."
The chairman said the group was putting together a full business plan, although the pace of its recovery and prospects would depend on wider economic conditions.
Northern Rock also stuck by plans to publish its 2007 results by the end of this month, although the figures are set to make grim reading following its woes last year.