Olivant, the private equity group, moved to elbow aside Virgin Group in the race to rescue Northern Rock by outlining an alternative plan that would repay the government’s emergency loan to the troubled lender more rapidly and give taxpayers a stake in its recovery.

The proposal, fronted by Luqman Arnold, the former chief executive of Abbey National, would see Olivant invest £150m of equity in Northern Rock. Up to £650m of equity would be provided by existing shareholders, £440m of which was already underwritten by investors controlling 23 per cent of the bank.