The rescue of Northern Rock was thrown into doubt last night when one of the two bidders for the bank threatened to walk away from the auction.

In a letter sent last night to Bryan Sanderson, the Rock chairman, the Olivant consortium issued two demands: full access to the banks financing Virgin Group’s rival bid for the Newcastle company; and a decision on the winning bidder to be made by Christmas. The consortium led by Luqman Arnold, the former Abbey chief executive, issued the ultimatum after Mr Sanderson said on Monday that the outcome of the auction would not be finalised until the new year. A decision had been expected by Christmas.

The latest blow to the troubled bank came only a day after another bidder, Cerberus, the American private equity firm, dropped out of the race. JC Flowers, another private equity firm, pulled out of the auction last week.

Mr Arnold is thought to fear that a lengthy sales process will do increasing damage to the bank’s brand and customer loyalty, making it more difficult for the bidders to secure funding.

At least three investment banks, led by Citigroup, have said that they will provide the estimated £30 billion in financing needed to buy and run the Rock, although none of them have signed binding agreements to do so.

Mr Arnold has asked Mr Sanderson for a “prompt decision” on the two issues he raised and threatened to drop his acquisition proposal if Rock does not meet his demands.

Virgin is the bank board’s preferred bidder, but shareholders favour the Olivant offer because Mr Arnold has offered to buy a minority stake in the bank for the present share price. Northern Rock stock closed down 5.2p yesterday at 99.2p a share. Virgins bid is worth closer to 25p per share.

The news came as Gordon Brown hinted yesterday that the Government was considering nationalisation before selling Northern Rock. In an interview with The Times, he said that all options were on the table, but added: “Remember, those people who are proposing nationalisation are proposing it only as a means to get into the private sector.”

Asked whether he thought it might be appropriate, he said that he was interested in the “eventual” outcome being the sale of Northern Rock to a private bidder. “The eventual outcome whatever way you look at it is to move into the private sector,” he said.

This came as Vince Cable, the acting Liberal Democrat leader, said that neither of the leading bidders for Northern Rock was “remotely capable” of raising the money required to take over the bank. Mr Cable faced angry charges of “running down” Northern Rock as he called for temporary nationalisation as the best means of protecting £30 billion worth of loans extended by the Government.

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