Read the full statement from Northern Rock

Read the Treasury statement in full

Long queues formed outside branches of Northern Rock today as anxious customers waited to withdraw savings after the bank was forced to seek an emergency bailout from the Bank of England.

Savers went in person to Northern Rock's branches to withdraw their money, after facing difficulties contacting the bank on the phone or via the internet.

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Customers who manage their money on the internet were blocked from seeing details of their account, including statements, when they tried to log in.

This morning Northern Rock gave warning that its profits would fall by 23 per cent, and its shares have dropped by nearly a quarter in value, after problems in the global credit markets forced it to ask for emergency financial support.

William Gough, 75, arriving at a Northern Rock branch in Central London this morning, said he did not believe the bank’s assurances that his savings were safe and intended to withdraw his funds.

“They’re telling us not to worry but we’ve heard it before, with Marconi”, he said, referring to the collapse of the telecoms equipment firm in 2002.

“At the time I put the money in I wouldn’t have imagined something like this would happen,” Mr Gough said while joining the back of a 40-strong queue.

Customers queued for up to an hour and, as news of the Bank of England bailout spread, the throng inside the branch was so dense that some struggled to open the door.

Gary Diamond beat the crowd by arriving early.

“I came down here to withdraw my funds because I’m concerned that Northern Rock are not still going to be in existence,” he said after closing his accounts.

He added that there was a danger that if others followed suit it could worsen Northern Rock’s position.

“But I don’t want to be the mug left without my savings,” he said.

Another customer, an elderly woman, said that she could not afford to take any chances.

“It’s my life savings we are talking about, my pension," she said. "I’ll have nothing left if they go under.”

Barry Hall left a Northern Rock branch this morning after transferring money, saying he felt relieved that his savings were now safe.

He said: “I’m coming up to retirement age and don’t want to be left with nothing. I’ve withdrawn everything. If I was younger I would try to ride it.”

A minority of customers said they were not concerned about the stability of the bank but had been forced to act over fears of a bank run.

Paul De Lamare, a 46-year-old consultant, said: “I’m not worried about the bonds. I don’t think the Bank of England would allow anything to happen. But I’m just trying to avoid getting caught short, so I’ve taken out cash.”

Shares in Northern Rock tumbled by 24.57 per cent to 157p today, wiping £1.6 billion of the company's market value.

The fall came after the Newcastle-based group said that full-year pre-tax profits would be between £500 million and £540 million — down from £588 million last year and against an average City forecast of £647 million for this year.

Northern Rock confirmed that the Bank of England had agreed to provide it with an emergency credit facility in the wake of the present credit market turmoil, but insisted that it was still a viable business.

It is also understood two financial institutions have inquired about launching a rescue offer for Northern Rock.

While the Bank of England and the Financial Services Authority (FSA) are not actively pushing for a takeover, it is believed that they would look positively on any strong institution prepared to take on the lender.

Adam Applegarth, the Northern Rock chief executive, said that the business remained sound but had suffered from the global breakdown in lending between banks.

He said that the bank had not yet needed to make use of the facility but had sought approval after it became clear that jitters in the credit market had not subsided in September, as had been expected.

Although Northern Rock is unable to reveal how much it can borrow, or the penalty rate at which it can do so, Mr Applegarth said that it was “clearly a substantial amount”.

Banks began to encounter liquidity issues at the beginning of August, when they stopped lending to one another amid fears that their loans would not be paid back.

Those problems were expected to subside at the beginning of this month but had not done so, prompting the action by Northern Rock.

“I can’t see when the global liquidity freeze is going to end,” Mr Applegarth said today, adding that other banks could be forced to take similar action.

“This is a global squeeze; it is not Northern Rock-specific," he said. "It must be difficult for other banks, too.”

Northern Rock’s statement assumes that the global liquidity problems in the banking sector will continue until the end of the year.

Mr Applegarth also gave warning that the continuing problems will have a direct effect on homeowners.

“I would expect to see mortgage customers paying more for their mortgages,” he said.

Asked what the Bank of England facility means for Northern Rock depositers, he said: "If I was a depositer, knowing I have the Bank of England behind me is probably the safest place to be."

In a rare move, the Bank of England agreed yesterday to throw Northern Rock a lifeline and become the “lender of last resort”, effectively agreeing the first bailout of a British bank since money markets sank into crisis over the summer.

Alistair Darling, the Chancellor, confirmed today that he had authorised support for Northern Rock, on recommendations from Mervyn King, the Governor of the Bank of England, and the FSA.

Mr Darling said that the FSA had concluded that Northern Rock remained solvent, exceeded its regulatory capital requirement and had a good-quality loan book.

He said: "The decision to provide a liquidity support facility to Northern Rock reflects the difficulties it has had in accessing longer-term funding and the mortgage securitisation market, on which Northern Rock is particularly reliant."

He told BBC Radio 4's Today programme: "Banks do have money ... there is not a shortage of money in the system, but ... they're reluctant to lend to each other."

He went on to defend the tripartite agreement between the Government, the FSA and the Bank of England to provide the support facility, saying: "It’s the right thing to do because it’s in everybody’s interests that we have a stable banking system, and that is what we’ve got."

Lehman Brothers, which entered an agreement with Northern Rock in July to underwrite mortgages sold under the Northern Rock brand, said that it was not affected by the announcement today.

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