The government has announced plans to nationalise the stricken bank Northern Rock after rejecting two offers to keep the institution in private hands.

Chancellor Alistair Darling made the decision to nationalise the bank after deciding that the private sector offers - including one from Sir Richard Branson's Virgin group - did not represent the best value for taxpayers.

Trading in Northern Rock shares has now been suspended and shareholders will be offered compensation at a rate decided by the a government-appointed panel based on the company's value without government backing.

Last year the bank became the first in over 100 years to experience a ‘run' after it emerged its business model had left it especially vulnerable to the credit crunch that followed the US sub-prime lending fiasco.