Pressure was mounting on Goldman Sachs last night to produce a financing package to push through a sale of Northern Rock and stave off nationalisation of the stricken bank.

It is understood that the two bidders — Virgin Group and Olivant — have exhausted all options for financing the acquisition of the Rock without government assistance.

Although continuing due diligence, they are waiting for the outcome of Goldman Sachs’s and the Government’s negotiations.

However, sources said last night that it was clear that Goldman Sachs was finding it difficult to come up with a viable solution.

One source close to the talks said: “Goldman Sachs is a firm of the highest class, but I think even they will struggle to be able to pull a magic rabbit out of the hat.”

The tripartite authority of the Bank of England, the Treasury and the Financial Services Authority appointed Goldman Sachs in September to evaluate potential financing options for a private sector sale. They gave the bank a cut-off point of mid-January to reach its conclusions.

Market conditions have deteriorated since then, with several of the banks, including Citigroup, that had been lined up to provide financing suffering multibillion-dollar losses of their own.

Among the possible solutions put forward by Goldman is a securitisation of the Rock’s existing £25 billion debt to the Treasury. Under the plan, the debt would be carved up into bonds that would be guaranteed by the Government and sold effectively as gilts.

However, another source said that there would be little chance of persuading already jittery investors to buy in: “The bottom line is there are not buyers for £25 billion of sterling out there.”

It is possible that Goldman could also persuade cash-rich sovereign wealth funds in the Middle East to stump up a portion of the cash, although one source said that was looking unlikely.

Another source said: “They might find some funny money but they’re not going to find an all-inclusive solution to the problem.”

Alistair Darling, the Chancellor, has said consistently that the preferred option is for a private sector sale of Northern Rock, although he has emphasised that all options remained on the table.

Several sources last night described the Goldman advice as “iterative” and said different ideas were constantly being tried and tested.

“There is no silver bullet,” one person close to the bank said.

“They’re not working away on a report then popping it on the Treasury’s desk at the end.”

Both Mr Darling and the Prime Minister have said in recent days that a decision on the Rock will be made within the next few weeks.

One source said that there would be no new developments at least until Mr Brown returned from a trip to China on Monday.

With financing options looking increasingly scarce, most observers believe that nationalisation is the most likely outcome, albeit a potentially disastrous one politically for the Government.

Northern Rock’s shares hit a record low yesterday of 52p as hints that nationalisation was imminent sent investors fleeing. The stock closed down 1¼p at 68p.

A Treasury spokesman declined to comment last night. It is understood that the Government has already drawn up plans for emergency legislation necessary to push through the nationalisation.

Goldman Sachs declined to comment.

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