BSA: Northern Rock business plan 'potentially unfair'

The Building Societies Association (BSA) has attacked Northern Rock's new business plan as potentially unfair to consumers and the industry as a whole.

The government-appointed executive chairman of the lender, Ron Sandler, yesterday set out his proposals for the reinvigoration of the company as it attempts to return to stability.

Key tenets of this strategy include plans to halve the company's asset base to form a "smaller, sustainable business" - with the removal of all government assistance over the next three to four years.

Mr Sandler also courted controversy by announcing the company could shed up to a third of its workforce over the coming four years, with the majority of the losses in the first year.

Northern Rock also informed the government savings would form a larger share of funds (with some accounts offering up to 6.25 per cent interest to attract interest), maintain its retail base and concentrate on premium mortgages.

However, despite assurances from the company it would not use government funds to "compete on an unfair basis", the BSA and other organisations regard the changes as potentially damaging to the market.

"This does little to allay our fears of unfair competition from the taxpayer-funded bank," said Adrian Coles, director-general of the BSA.

"Northern Rock has confirmed the bank’s market share of retail deposits will be increased over the next three or four years and we have only Northern Rock’s guarantee that they will not compete on an unfair basis – this is not good enough and we will look for much more detail on this in the finalised business plan later this month."

The threat of job losses has also irked trade unions.

"The employees have already faced months of insecurity and anxiety about their future," said Graham Goddard, deputy general secretary of Unite.

"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."