The decision has been made to manage costs in order to maintain the Society's strong position in light of expected difficult trading conditions in 2009, where residential lending is predicted to operate at a significantly lower level than in previous years and commercial lending activities will be wound down.
The Society has reviewed its resource requirements to service third party contracts in its Strategic Solutions division, which provides outsourced services to other institutions, and has concluded that, due to a combination of the demise of the former Icelandic internet bank Icesave, and forecast business levels for 2009, current staffing in this area cannot currently be supported.
A formal 90-day consultation period has begun and the Society will be working closely with both staff and the union, Unite, throughout the process.
Whilst the redundancies will be in most areas of the business, the majority will be in the Society's head offices in Newcastle City Centre and Cobalt Business Park.
No branch closures will occur as a result of this announcement.
Chief Executive, Colin Seccombe, said: "After creating some 200 new jobs through 2008, we are extremely disappointed to have to make these redundancies, which are a direct result of the unprecedented downturn in the financial markets that we, and most other financial institutions, are experiencing.
"Looking at the reasons for this, the lending landscape is completely unrecognisable from what it was as little as six months ago.
"Competition for retail funding - the main way that we as a mutual building society fund our lending - is extremely tough, and there is not the demand for mortgages that there was. CML figures show that by November 2008 gross lending had reduced by 51% compared to November 2007.
"Our Strategic Solutions division has a pipeline of new business at various stages of development, but this is not currently sufficient to replace the loss of Landsbanki's Icesave, which alone required some 100 dedicated staff.
"We have unfortunately had to take this unprecedented decision to ensure that we remain efficient and in a strong financial position for the future, which is in the best interests of our members.
"We are committed to remaining independent and are not looking to merge with another Building Society and, as well as being one of the largest private sector employers in the North East of England, we remain the tenth biggest and one of the strongest mutual building societies in the UK."
