The Halifax Bank, which employs 7,000 people in the region, is in talks with the Bank of Scotland over a possible £27.7 billion merger.

The country's largest mortgage group has issued a joint statement with Bank of Scotland (BoS) about a 'merger of equals' involving a no premium, one for one share swap.

The deal would create the fifth largest UK bank, but talks are still ongoing. No agreement has been reached yet over where the new group would be based, in Edinburgh or Yorkshire, but alarm bells have already started ringing with the Independent Union of Halifax Staff.

General secretary Ged Nichols said: "We are concerned because whenever there's a merger there is the prospect of job losses on the horizon. "The Halifax is being quite sanguine about it, saying there's little overlap between the two banks' businesses, but there's bound to be some duplication over time.

"So we are looking for talks to make sure there will be no compulsory redundancies, and working closely with the BoS union to present a united front."

The Halifax, which is the market's leading mortgage and savings provider, has spent the last three years trying to diversify into areas like life assurances and pension trusts.

But head of media relations, Mark Hemingway, said nothing had been finalised yet. "There has been a lot of speculation about where the headquarters will be based and what the management structure or branding will be, but discussions are taking place now and nothing has been decided," he said.

"It's far too early to look at the impact on jobs but there are very few areas of overlap between the two banks."