INSURANCE giant Aviva, one of York’s major employers, is eyeing a £650 million takeover of The Co-operative’s insurance business, it has been reported.

The news comes only days after the firm, which employs about 2,500 people in York, revealed it was planning to axe 2,000 jobs worldwide - about six per cent of its global workforce.

Aviva is said to be among a number of firms considering bidding after the Co-op put the division up for sale last month to raise cash to plug a capital shortfall - which is threatening its swoop for 632 Lloyds Banking Group branches, according to The Sunday Times.

The Co-op has already sold its life insurance and asset management arm to Royal London for £219 million to boost its balance sheet as City regulators put lenders under pressure to address a £25 billion combined capital hole.

It is thought that Aviva is among a number of potential bidders, also including Ageas, the UK arm of Belgian financial services group Fortis, and private equity entrepreneur Edmund Truell.

But such a move would be controversial for Norwich-based Aviva, which has been shrinking not expanding in recent years.