ANXIOUS savers queued outside Northern Rock branches across the country yesterday, despite assurances their money was safe.

Customers of the lender, which is based in Newcastle, were last night urged not to panic after it confirmed it had asked for emergency funding from the Bank of England.

The company's share price plunged more than 30 per cent on the back of the news, closing at 492p - its stock has fallen £3.2bn since shares reached a year-high in February.

But despite customer confidence being at an all-time low, bosses said it was "business as normal" and stressed that Northern Rock was a "strong viable company" with a prosperous future.

However, the lender, which employs about 6,000 people, is expected to reduce its staff in the region through natural turnover and a recruitment freeze.

Northern Rock warned that its profits would be affected, predicting it would make between £500m and £540m this year - well below the £647m previously predicted.

Chief executive Adam Applegarth said: "It is a pretty rotten day for us all. I am bitterly disappointed."

Northern Rock has become Britain's biggest casualty in a global financial crisis sparked by US mortgage defaults.

It is suffering because it is heavily reliant on wholesale money markets to raise cash for lending, as well as sales of bonds based on its mortgage debts - so-called asset-backed securities.

Its costs have soared as banks have stopped lending to each other due to market fears over exposure to potential losses on high-risk (so- called sub-prime) US mortgages. This has also affected Northern Rock's securities sales as investors lose confidence in them.

As a result, the British Government authorised the Bank of England to provide an unspecified amount of money to Northern Rock. The lender has yet to use the money, which Mr Applegarth said was "a backstop in case we need to use it".

He said: "My advice to customers is, with the Bank of England providing this liquidity, they should be greatly reassured.

"If I was a depositor, I would be reassured if the Bank of England was behind me."

Mr Applegarth, who joined Northern Rock from Durham University in 1983, said the present credit crunch was "a set of circumstances I have never seen in 25 years".

He warned: "Looking forward, I can't see when the global liquidity freeze is going to end. We simply do not know."

He said homeowners would face more expensive mortgages in the future as the impact of the current crisis filters through to borrowers.

"What we will see is slower growth and wider margins. That is how I expect the reassessment of credit risk to roll through global markets," he added.

While Northern Rock faces a short-term squeeze, experts are more confident about the long-term prospects for the company.

Analyst James Hamilton said: "We do not see the Northern Rock model as structurally broken. Its problems could however last some time and wipe out much of the group profit.

"We do not believe that Northern Rock will go bust. On top of the fundamentals it is too big to fail as evidenced by the Bank of England actions which have Financial Services Authority and government support."

Mr Applegarth admitted that the reputation of Northern Rock, which holds deposits of £24bn from 1.5 million savers and lends to 800,000 homeowners, had already been damaged by the situation.

"We will have to bust a gut to rebuild it. It is going to be a long slog, we don't pretend otherwise," he said.

"There is a high degree of regard for Northern Rock in the North-East... I think that will still prevail... especially in the North-East we expect that emotional support to be there."

In the current climate, the doubt over when the market turmoil will ease is also serving to undermine other stocks in the sector dependent on the money markets.

Bradford & Bingley and Alliance & Leicester have both seen share prices suffer as a result of the turmoil, while specialist lender and FTSE 250 member Paragon also fell more than 20 per cent yesterday after Northern Rock's announcement.

"This is not a Northern Rock issue, it is a global issue," said Mr Applegarth. "We were affected first and we chose to react first to make sure the business and our customers are completely looked after."

The fall in Northern Rock's share price sparked speculation that it could become a takeover target, with HSBC named by analysts as a possible buyer.

Mr Applegarth said that shareholder interests would be put first and that the future of the company "would be for the board to determine once 2008 has panned out".