by business editor Trevor Sturgess

High street banking is set for a shake-up after Sir Richard Branson's Virgin Money snapped up taxpayer-owned Northern Rock for £747m.

The deal safeguards 2,100 jobs and involves the transfer of 75 branches – the only Kent outlet is in Bromley – a £14bn mortgage book and £16bn in retail deposits.

It adds a million customers to Virgin Money's three million and could lead to more lending to small business.

Eventual revenue returned to the taxpayer could exceed £1bn, less than the £1.4bn injected in the taxpayer bailout.

Branson said: "Banking in the UK needs some fresh ideas and an injection of new competition.

"I'm delighted we'll get the chance to work with the loyal staff of Northern Rock to create a new force in the market.

"Virgin has a history of entering new sectors to improve service and provide value for customers. We plan to do the same in banking."

Chancellor of the Exchequer George Osborne said: "The sale of Northern Rock to Virgin Money is an important first step in getting the British taxpayer out of the business of owning banks.

"It represents value for money and will increase choice on the high street."

Which? welcomed the sale, saying that a strong challenger to the dominant banks was vital if consumers were to see greater competition, fairness and a better deal on the high street.

Michael Ossei, personal finance expert at uSwitch.com, said Virgin could become a real contender.

"By combining the best of Northern Rock's competitive mortgages and savings products with its credit cards, consumers could see a new bank on their high street that can really challenge the existing ones," he said.

Sir David Clementi will chair the combined business and Jayne-Anne Gadhia will be CEO. It will operate under the Virgin Money brand.

Northern Rock was the first failing bank to be bailed out by the taxpayer in the credit crunch, followed by Lloyds Banking Group (41% owned by the taxpayer) and the Royal Bank of Scotland (83%).

Images of queues of anxious savers snaking around Northern Rock branches desperate to withdraw their cash became an iconic symbol of the global financial crisis.

The deal is subject to official approval but is expected to go through by New Year's Day.