Northern Rock withholds dividend

Northern Rock will not pay the interim dividend it announced in July before August's market turmoil, BBC business editor Robert Peston has learned.

The firm has bowed to pressure from the Financial Services Authority (FSA) and the Treasury not to make the payment - worth £59m - Mr Peston said.

An official announcement is expected later on Tuesday or on Wednesday.

It is another blow for shareholders, who have now joined forces in an action group to promote their interests.

Action group

The group has been set up by the UK Shareholders Association (UKSA), which says "many shareholders were persuaded to invest in shares in the company in recent months based on the apparent strength of the business when in reality the company was in great financial difficulty".

The group is opposed to a quick disposal of Northern Rock that might not reflect the true value of its assets.

Northern Rock's decision on the dividend may only be temporary because it is likely that the bank will defer the dividend payment, not cancel it altogether.