After months of toing and froing and massive banking and lawyers' fees, the farce that is the sale of Northern Rock seems to have come full circle.

Yesterday Olivant pulled out of the bidding race at the eleventh hour, leaving Sir Richard Branson once again as the sole preferred bidder. Is it just me, or is anyone else suffering from severe sense of déjà vu?

It was back in November when Olivant announced that it had plans for Northern Rock, with great fanfare, and Luqman Arnold embarked on a whirlwind tour of television and radio studios to present the merits of his rescue plan. The Government - begrudingly, it seemed at the time - agreed to elevate Mr Arnold to preferred bidding status, alongside Sir Richard, and the race for the Rock was on.

Things were made even easier for the bidders when the Treasury agreed, controversially, to guarantee the £26billion of debt owed to it by Northern Rock. That meant that Olivant and Virgin could stop scurrying around looking for commercial banks to lend them the billions needed to pay off the taxpayers' loans.

Yet ironically, that very guarantee - designed to lend a hand to private sector bidders - seems to have made it impossible for Mr Arnold to proceed with his proposal. Like

JC Flowers, the American private equity firm that slipped up before them, Olivant said that it was unable to square the demands of the Government against its own needs for a decent return on its equity.

Like other private equity buyers, Mr Arnold was essentially a turnaround merchant, who would have required a return on his cash much sooner than a scaled-down business plan for the Rock would have allowed. Perversely, the Government could not allow him to turn around the Rock too quickly because it would have put the Treasury at odds with the “state aid” rules of the European Union.

In other words, despite months of due diligence and painstaking preparation, Mr Arnold simply couldn't make the maths work on the Government's terms. You have to wonder why it took him and a cohort of advisers until the eleventh hour before the penny dropped.

It's hard to see how Paul Thompson, the executive who would be chief executive under a standalone plan, stands a chance against Britain's bearded billionaire. After all, the Treasury's justification for Sir Richard from the very start was the power of his Virgin brand. How could they now consider as a serious contender a rescue plan that leaves the Rock intact in the hands of Mr Thompson, who most people would never have heard of?

No wonder Sir Richard was looking so cheerful as he left Downing Street yesterday.

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