Northern Rock small investors demand proper payback

Northern Rock small shareholders are demanding proper compensation after the nationalisation of the mortgage lender.

The government is due to carry out a valuation but shareholder are demanding it carries out a completely independent and unbiased valuation of the lender before shareholders are compensated.

UK Shareholders Association (UKSA) estimates there are as many as 150,000 small shareholders set to lose out – with 13,000 alone in the north-east.

Under current proposals, investors look set to earn 5p a share, but the UKSA predicts an unbiased valuation of Northern Rock as a going concern would see compensation of £3.77.

The bank's share price hit highs in 2007 of 1,258p a share, and many of the small shareholders who took a stake in the firm when it demutualised have lost out.

"A lot of people have lost nest eggs," said Chris Hulme, a north-east businessman who is leading the UKSA's local campaign for support.

He added these people are being tarred with the brush of being small share holders who were simply trying to profit from Northern Rock problems, when in fact they simply held shares since the lender went private in 1997.

The UKSA is now calling for a valuation of Northern Rock should be fair and independent valuing the firm as a going concern.

"The government does not seem to know the meaning of fair and independent," said Mr Hulme.

He added legal advice received by the UKSA shows the government is free to nationalise the bank but "they must treat shareholders fairly".

An application for a judicial review was imminent – but any final decision could wait until 2009.

Mr Hulme – a mortgage advisor and Northern Rock mortgage customer – also hit out at the lender's failure to follow Bank of England rate cuts.

He said: "Shrinking the business is the best way forward but the way its being done for customers is quite poor.

"The Bank of England has cut interest rate by 0.75 per cent and Northern Rock has cut rates by 0.2 per cent. It is a slap in the face."

More details of the UKSA Northern Rock small shareholder campaign are available on Mr Hulme's website.