The consortium led by Luqman Arnold, the former Abbey chief executive, is expected to table a revised bid for Northern Rock by the end of tomorrow.

Olivant is thought to still be in talks with both Northern Rock and potential funding banks as it hammers out the final details of its offer. Sources said that most banks were open to providing finance for any successful bidder for Northern Rock, rather than being tied to one offer.

This comes after revised bids from JC Flowers and Cerberus, the American private equity firms, despite Virgin Group winning preferred-bidder status in the auction of the troubled Newcastle-based bank.

Sources said that the Treasury would not favour making Northern Rock insolvent or nationalising the bank, despite reports that it was drawing up emergency plans to repay savers’ desposits if a suitable bidder was not found.

Shares in Northern Rock closed down 6p at 103p yesterday.

The bank was forced to seek emergency funding from the Bank of England after it failed to raise cash in the wholesale markets as a result of the credit crunch.

Meanwhile, staff at Northern Rock have been handed a £200 Christmas bonus and are also understood to have received a 2 per cent one-off sum and 4 per cent salary increase.

The pay rises, which recognise the “tremendous work” carried out by employees and inflation, do not apply to top managment, according to a Northern Rock spokesman.

An average employee earning £25,000 would be about £1,700 better off.

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