Northern Rock's new executive chairman yesterday pledged to reduce the bank's mortgage book by half and its workforce by a third in a move that put him on a collision course with both unions and competitors.

Ron Sandler said he would cut by 50% the £100bn to £110bn asset base of the business which was nationalised last month by encouraging customers to move elsewhere, although he said he would consider "limited asset sales".

The bank will continue to issue a small number of prime mortgages to replenish the pool of loans for its Granite securitisation vehicle.

Sandler also plans to cut 2000 jobs from the 6000-strong workforce as he seeks to repay in the next three to four years around £25bn in Bank of England loans Northern Rock has accumulated since a funding crisis in September.

Graham Goddard, deputy general secretary of trade union Unite, said: "We will be working to mitigate the implications of the recent crisis on the employees who have worked tirelessly to ensure there is a sustainable business in the future."

Alan Clarke, the chief executive of One NorthEast who is leading the Northern Rock Response Group to help employees, said he was confident that departing staff could help fill an estimated 21,000 vacancies in the region.

But Sandler's plans, which will see the bank increase the proportion of the mortgages it funds from customers' deposits from its current 20%, left rivals worried.

Adrian Coles, director-general of the Building Societies Association, said: "Northern Rock has confirmed that the bank's market share of retail deposits will be increased over the next three or four years, and we have only Northern Rock's guarantee that they will not compete on an unfair basis - this is not good enough."

The European Union said yesterday that it had received a copy of the government's plan for turning around Northern Rock and would check that it complies with state aid rules.