Northern Rock cuts 250 jobs in move to the internet

Northern Rock is to axe 250 jobs by the end of the year and close a quarter of its branches and move into telephone and internet banking instead.

The Newcastle-based bank will also make its first move into the booming Irish market this morning when it announces a new telephone, post and internet bank account in Dublin in partnership with Canadian Imperial Bank of Commerce.

Despite the job cuts in its branch network, the bank painted a positive picture of its prospects for the remainder of the year and said it would achieve a net increase of 150 jobs through plans to open a new mortgage call centre and new customer service roles in its Newcastle head office.

The upheaval at Northern Rock follows restructuring at its rivals, including Woolwich which is shedding 330 management roles and Barclays, which admitted over the weekend that it was to close a further 200 branches. The threat of job cuts also looms if Bank of Scotland is successful in its takeover of NatWest, which is axing 1,650 posts on top of 10,000 already planned.

Northern Rock's decision to step up its e-commerce operation came amid comments from the head of the financial services authority about the potential threat to banks' profits from new entrants to the industry on the internet.

"The internet lowers barriers to entry, including geographical barriers to entry - in particular it removes the need to build a branch network," Howard Davies, the FSA chairman told an audience of bankers last night. "So, for an industry with profitability and already attracting new entrants, the internet may well speed up the process of profit erosion."

Northern Rock, which felt the pain of new entrants such as Prudential's Egg in the first half when it suffered £400m of outflows of savings, said it would offer jobs to the 250 people now employed in the 29 branches being closed in the Newcastle headquarters, where 300 new jobs would be created to support e-commerce and other growth areas. It accepted that people outside area might not take up the offers.

The bank is also opening an automated mortgage decision call centre in Doxford, Sunderland where 100 people will be employed. It also plans to bring more of its business on-line next year and said it would sell off its Regency Care Homes business. Shares in the bank rose 8.75p to 417.75p.