UK nationalises Northern Rock

Economic growth, Financial Events, Leverage

The UK government has today nationalised the country’s 8th largest bank, responsible for 18.9% of UK mortgage lending.

You may remember that Northern Rock was an immediate victim of the US subprime crisis. Its funding model, based on securitisation, failed to work once lenders became more concerned about return of capital than return on capital. Since September, the Bank of England has been forced to provide GBP 55 bn of emergency funding, following the UK’s first bank run in over 100 years.

The government even employed Goldman Sachs to scout the world and seek new investors. Sovereign Wealth Funds and others were approached, but none would agree to participate in a rescue. And so a bank which had an asset value of over GBP 100 billion in August, is now dependent on government for its survival.

The absence of Northern Rock will put further pressure on the UK housing market. Northern Rock had grown via aggressive lending, providing loans at multiples of 10 times salary, more than treble historical norms. In turn, this will reduce chemical industry sales to this important sector.

PREVIOUS POST

China exports inflation

17/02/2008

China has been a major source of price deflation for the past decade. It is now ...

Learn more
NEXT POST

The law of unintended consequences

19/02/2008

There’s an interesting article on Bloomberg, suggesting that the US Fed’s dr...

Learn more
More posts
UK, EU27 and EEA businesses need to start planning for a No Deal Brexit on 31 October
28/07/2019

New UK premier, Boris Johnson, said last week that the UK must leave the EU by 31 October, “do or ...

Read
London house prices edge closer to a tumble
21/07/2019

After the excitement of Wimbledon tennis and a cricket World Cup final, Londoners were back to their...

Read
G7 births hit new record low, below Depression level in 1933
14/07/2019

If a country doesn’t have any babies, then in time it won’t have an economy. But that...

Read
From subprime to stimulus…and now social division
06/07/2019

The blog has now been running for 12 years since the first post was written from Thailand at the end...

Read
Resilience amidst headwinds is key for H2
30/06/2019

Resilience is set to become the key issue as we look forward to H2, as I note in a new analysis for ...

Read
Perennials set to defeat Fed’s attempt to maintain the stock market rally as deflation looms
23/06/2019

Never let reality get in the way of a good theory. That’s been the policy of western central b...

Read
Europe’s auto sector suffers as Dieselgate and China’s downturn hit sales
16/06/2019

Trade wars, Dieselgate and recession risk are having a major impact on the European auto industry, a...

Read
2019 Global Outlook – a mid-year update: ACS webinar on Thursday
04/06/2019

There will be no shortage of important topics to discuss on Thursday, at my regular Chemistry and t...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more