Northern Rock Foundation to close after failure of funding talks

The grant-maker has been unable to secure a deal with Virgin Money, its sole source of funds, according to foundation chair Alastair Balls

Alastair Balls
Alastair Balls

The Northern Rock Foundation will close after it was unable to reach an agreement over future funding with Virgin Money.

The grant-maker, which supports organisations that tackle disadvantage in north-east England and Cumbria and has made grants totalling £215m since 1997, said in a statement that discussions with Virgin Money, which bought and swallowed up Northern Rock in 2012, had ended without agreement over future funding.

It said that because Northern Rock had been the foundation’s sole funder, it was "now inevitable" that it would close.

"The foundation hoped to agree with Virgin Money a viable long-term solution to secure the foundation’s future," the statement said.

"Following wide-ranging discussions, it is now confirmed that Virgin Money cannot commit funding to ensure this, and will not continue the previous funding agreement between us."

The foundation said that Virgin Money had discussed "ideas for partnership working" but "none of the proposals included any funding for the foundation itself".

It said that these ideas "either duplicated the work of others or weren’t aimed at priority areas of need, and therefore were not the best use of the foundation’s funds".

Alastair Balls, the foundation’s chair, said: "It is very disappointing after such extensive discussions to have to accept that Virgin Money will not commit to fund the foundation in future.

"Trustees are keen to ensure that our remaining funds are used to achieve significant benefit in the north-east and Cumbria, and we will announce our plans later this year."

The grant-maker expects to spend almost £7m on grant programmes and other projects in 2014.

The foundation was set up when the Northern Rock Building Society demutualised in 1997. It received 5 per cent of Northern Rock’s pre-tax profits until 2007, then £15m a year between 2008 and 2010, while the bank was taken into temporary public ownership.

It then received 1 per cent of pre-tax profits from January 2011. When Virgin Money bought the bank in 2012, it promised to continue this arrangement until 2013.

Virgin Money has provided £1.5m of funding over the past two years.

Before Northern Rock’s collapse the foundation gave out £30m in grants a year. No decision has yet been made on the future of its 13 employees.

The grant programme will finish at the end of 2014 and there will be an orderly winding down of the foundation over 12 to 18 months, Balls said.

Jo Barnett, head of social enterprise at Virgin Money, said: "The Northern Rock Foundation has contributed to some fantastic work here in the north east and Cumbrian regions for many years, and we have been proud to support it with £1.5m of donations over the past two years.

"We have tried hard to find a way to continue working together on programmes that would deliver significant benefit to the region, but we have not been able to agree a way forward."

She said that Virgin Money would "continue to support the north-east community strongly in a variety of ways and look forward to establishing new partnerships to deliver a range of exciting new projects".

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