UP to 1500 jobs could be lost following the purchase of Virgin Money by CYBG, owners of the Clydesdale Bank, for £1.7 billion.
As a result of the deal, news of which had been trailed for weeks, the new joint entity will become the sixth-largest bank in the UK with six million customers, but there are fears for 16 per cent of the 9,500 jobs in the two institutions.
The sale led to immediate fears for staff of the Newcastle-based Virgin Money in particular. CYBG has confirmed the new banking entity, which will retain the Virgin name, will be based in Glasgow.
The Clydesdale Bank name is expected to stay in at least one respect, as it will continue to appear on banknotes.
The deal will also mean the expected but as yet unconfirmed closure of a number of Virgin and CYBG’s 250 branches across the UK. CYBG said it hopes to achieve this by “natural attrition,” but there are bound to be political questions raised after the controversial RBS and Bank of Scotland branch closures.
It is also another banking disaster for the taxpayer, as Virgin Money acquired Northern Rock from the UK Government for £747 million after Northern Rock was nationalised in 2008 to prevent it going under after the first run on a British bank in 150 years.
Virgin Money subsequently paid another £200m to the Treasury, which had spent £1.4bn bailing out Northern Rock, meaning a loss of nearly £500m on that deal. Yesterday’s announcement that Virgin Money was being sold for £1.7bn means a paper profit of more than £600m for Virgin Group led by Sir Richard Branson, and zero for the taxpayer.
Branson owns 35 per cent of Virgin Money and thus could see his personal fortune boosted by a nine-figure sum. Branson will also double the amount he receives in annual royalty payments for the Virgin brand from £6m now to £12m, rising to £15m.
The UK’s largest trade union Unite represents the workforce at Virgin Money and also staff at Clydesdale and Yorkshire Bank. It has expressed alarm at the prospect of thousands of job cuts.
Unite stated: “As the workforce turn up to work today the announcement that the £1.7bn sale of Virgin Money [to] CYBG could result in a 16 per cent reduction in the combined workforce will come as a shock to staff across the country.”
Rob MacGregor, national officer for Unite, which is the only recognised union within both CYBG and Virgin Money, said: “Thousands of banking employees have this morning heard through the media that their jobs are no longer secure.
“Unite the union represents staff across both banks and has this morning expressed deep unease about jobs and services across both these financial institutions.
“The purchase of Virgin Money by CYBG will change the face of banking in many high streets across the country. It is vital that the skilled and experienced workforce are given assurances that branches and contact centres will not be closed leaving customers without their much-valued access to local banking.
“Unite is now seeking an urgent meeting with the new combined chief executive David Duffy in order to secure assurances about the employment of the dedicated women and men across the county.”
Clydesdale Bank is the the third-largest of Scotland’s banks and was established by businessmen and merchants in 1838 in Glasgow. Yorkshire Bank was founded in 1859 in Halifax, West Yorkshire by Colonel Edward Akroyd. They came together when owners the National Australia Bank formed CYBG in early 2016.
The deal announced yesterday morning followed weeks of negotiation over the sale price. CYBG also offered Virgin Money shareholders a bigger stake in the new bank, reported to be 38 per cent of the stock.
Jim Pettigrew, the CYBG chairman, said: “It is clear to us that the combined group can transform the UK banking landscape and offer real benefits to customers and communities throughout the UK.”
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