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Tue, Dec 16, 2008 - Page 10 News List

Barclays chief predicts more economic gloom for UK


Barclays group chief executive John Varley warned in an interview yesterday that Britain’s economic gloom was far from over, predicting further falls in house prices and soaring unemployment.

In an interview with Sky News television, he also described as “madness” the practice of giving out mortgages worth far more than the property involved, and said banks must accept their part in the financial crisis with “humility.”

Varley said he expected house prices in Britain to slump by 25 percent to 30 percent overall, and said they had only fallen by about half that so far.

“We’re probably about halfway through that period, so in other words we’ve got another 10 [percent] to 15 percent to fall between now and the end of next year. That would be our assessment,” the bank chief said.

Varley said the level of mortgage borrowing seen over the last decade, where customers were given loans worth more than their homes, would be seen “as an anomaly rather than a normalcy.”

He also had a bleak view of the job market, suggesting unemployment could rise by 700,000 over the next 12 months in Britain.

“Our expectation is that the UK economy will contract during the course of 2009, but our expectation is that the UK economy will grow again in 2010,” he said. “As soon as that starts happening then of course the prospect for people who are out of work moves very quickly, and we’ve got to ensure that by behaving responsibly as a banking industry, we can support that trend.”

He said there were “quite a lot of players” involved in the economic turmoil, including central banks, governments and “certainly” banks.

“And the banks have to be prepared to have the humility to acknowledge that and accept it and to say sorry,” he said.

“It’s important that the industry is in that space partly because they need to take their share of responsibility, we need to take our share of responsibility as an industry, but partly also because the banks have to be at the table when the reconstruction and the remediation is discussed and agreed.”

He explained why his bank rejected a state handout that was accepted by many of Britain’s leading banks, saying Barclays’ international interests meant it could not give London the control it expected in return.

“We want choice. I do attach, from the point of view of value for our shareholders, significant importance to independence,” he said.

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