Pressure mounts on Darling as Northern Rock sale gathers pace

The Chancellor Alistair Darling is to spell out the Government's position on the future of Northern Rock this week as the pot-ential sale of the beleaguered bank continues to gather pace after 10 bidders expressed interest in taking over the company.

Pressure is mounting on Mr Darling to detail his plans for the bank after the Treasury was forced to provide at least £20bn in emergency funding to keep the company afloat. He is expected to publish a "statement of principles" over the coming days that will detail the Government's priorities, which will probably centre on ensuring that a sale of Northern Rock helps stabilise the UK economy while also protecting taxpayers and the bank's customers.

However, the Chancellor will come under pressure to explain how long the Government intends to continue funding the bank. The Treasury has refused to comment on reports that it is working to change the status of its funding to Northern Rock to "restructuring aid" to comply with European Union regulations regarding state aid. The Government has until February to make the change, by which time a sale of the bank may have been agreed.

Vince Cable, the acting leader of the Liberal Democrats, has demanded that Mr Darling explain the Government's position to the House of Commons today and to consider nationalising the business. "The Government may be hoping for a knight in shining armour from the private sector to take on the bank and pay back Government loans but this looks highly unlikely. The Chancellor must come to the House of Commons to explain the position of the bank," Mr Cable said.

Northern Rock's board met yesterday to consider its options. Between eight and ten expressions of interest in taking over the company have been lodged over the past few days. Further bids are possible over the coming week. Sir Richard Branson's Virgin Group and Olivant, led by former Abbey chief executive Luqman Arnold, have confirmed their interest in the bank. Private equity companies JD Flowers and Cerberus are thought to be among the other bidders, with the Dutch bank ING and the American private equity company Apollo also rumoured to be in the running.

Virgin has pledged to immediately return £10bn to the Treasury if its bid to take over Northern Rock and pool it with its existing Virgin Money division succeeds. Virgin has secured a £20bn loan from a syndicate led by Royal Bank of Scotland to fund its bid and is expected to pour £1bn in cash into the business to strengthen its position.

But the sale of Northern Rock has hit a pothole, with its two largest shareholders pledging to oppose the sell-off of the bank. RAB Capital and SRM Global, two hedge funds that control a combined stake of 13 per cent in Northern Rock, have lashed out at the "fire sale" of the company. Jon Wood, the head of SRM, has told the company's board that the sale process should be stopped, that selling off the bank "on the cheap" should be blocked and that the best option would be to maintain its independence. Philip Richards, the chief executive of RAB, has echoed those concerns, arguing that the company should be given time under a proven management team to improve its fortunes.

Shareholders are concerned that they may lose their entire investment if the company is sold off, arguing that the bank is a good quality business that has been hit by extraordinary market conditions as the credit markets that once funded its growth have dried up. Bryan Sanderson, the chairman of Northern Rock, said last week that there is still a good chance that shareholders could claw back some of their investment.