Northern Rock, the nationalised bank, is to cut fewer jobs than expected in its drive to reduce costs and improve profitability.

However, the bank angered unions yesterday by insisting that 800 of the 1,300 jobs it intends to shed will come through compulsory redundancy.

Ron Sandler, executive chairman, said: “Confirming job losses is never easy, but our staff have been kept well informed and the need to contract the size of the company is well understood. This remains a very tough time for our staff, but the restructure of the company is nearing completion and we are now in the final phase of this difficult process.”

Graham Goddard, deputy general secretary of Unite, said: “We are disappointed that Northern Rock has announced compulsory redundancies. We still believe that the job losses could have been absorbed through natural wastage and we are hopeful that Northern Rock will reduce the actual number of compulsory redundancies.”

Originally the bank, which came close to collapse last autumn, had planned to lose 2,000 jobs, about a third of its workforce, in an effort to restructure and return to the commercial sector. Having announced the final figure of 1,300 losses after consultation with Unite, the biggest union, it will begin individual consultations with the employees affected. Unite had called for all the job cuts to be achieved voluntarily or through natural wastage.

The bank raised the spectre of more job losses in future but it offered a pledge that there would be no further compulsory redundancies, saying that any additional cuts in the workforce would be achieved through natural staff turnover.

Northern Rock's initial plans for 2,000 job cuts had envisaged that the posts would go over the next three years, but in May the bank said that it would speed up the process so that all the cuts were implemented this year. Northern Rock said that yesterday's job losses figure reflected “some natural staff turnover to date and also the company's commitment to work with Unite and other employee representatives to explore options within the restructure to minimise job losses.”

Because of natural wastage that has already occurred, the bank will have a workforce of about 4,000 when the 1,300 jobs have been cut - the same number that it had targeted early on.

Mr Goddard said that the union would be investigating other employment opportunities for its members.

Northern Rock is trying to pay back a £25 billion loan from the Bank of England that was given last September, when the bank was left on the brink of collapse after it had trouble raising funds on the wholesale money markets and after a run on its deposits by customers.

RAB Capital became the latest hedge fund to suffer from volatile markets as it reported that first-half profits had almost halved to only £12.5 million before tax and its assets under management had fallen by more than $1 billion (£500 million) in six months. RAB’s $1.4 billion Special Situations Fund, famous for its investment in Northern Rock, fell by 23 per cent in the six months to June 30.

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