1,500 jobs likely to go as Clydesdale takes over Virgin Money in £1.7bn deal

The owner of Clydesdale Bank, Glasgow-based CYBG, has agreed to buy Virgin Money for £1.7bn in a move that reports suggest could result in 1,500 job loses.

The terms of the deal outline that all of the retail customers of CYBG, which includes Yorkshire Bank, will be moved to Virgin Money over the next three years.

The tie-up will result in the creation of the UK’s sixth-largest bank, with about six million customers.

David Duffy, CYBG chief executive, said the deal provided “the opportunity to build a best-of-both model that draws on the talent of both CYBG and Virgin Money”.

Mr Duffy and the rest of CYBG’s existing leadership team will take charge of the enlarged group, but will introduce the Virgin name across its businesses to help build its network outside its regional heartlands.

CYBG will pay Richard Branson’s Virgin Group, which controls the brand name, an annual royalty fee starting at £12m and rising to above £15m after five years.

Virgin Group is Virgin Money’s biggest shareholder with a 34.8 per cent stake in the business.

The agreement will see Virgin Money shareholders will get 1.2125 new CYBG shares for every Virgin Money share they hold, and will end up owning about 38 per cent of the combined business.

CYBG said the combined group would have about 9,500 employees, but it intended to reduce that total by about one-sixth, suggesting about 1,500 jobs would go.

It said some of those job losses would be achieved “via natural attrition”.

Jayne-Anne Gadhia, Virgin Money chief executive, will advise the enlarged group in a “consultancy role” for an undetermined period of time after the deal completes.

While the companies celebrated the agreement as a chance to “create a truly national competitor to the status quo”, unions aired their concern at the prospect of large numbers of job cuts.

The Unite union expressed “deep unease” at the prospect of the takeover, adding it was “vital that the skilled and experienced workforce are given assurances that branches and contact centres will not be closed”.

Challenger bank Virgin Money was founded in 1995 before expanding in 2011 when it bought the remnants of Northern Rock for about £747m.

Donald Tosh, Divisional Director at Brewin Dolphin Glasgow, said: “The CYBG-Virgin Money deal is a good move for the combined group in the long term and creates a new competitor to Britain’s biggest banks. But, what’s most interesting about this move is its timing. A range of economic data has shown that the UK economy is beginning to stutter, so it will be more important to watch what and to whom the wider business is lending, rather than just how much it is lending.”