Barclays chief Jes Staley believes that the biggest economic boom since the one after World War Two will be experienced by the United Kingdom. This comment was made by him even as the bank reported more than doubling of profits year on year for the first quarter at £2.4bn.
“We estimate the UK economy will grow at its fastest rate since 1948. That’s pretty spectacular,” he said.
There will be a strong rebound in demand because of the vaccine programme and built-up savings, he said.
UK could have an economic growth similar to that of the United States – amongst the fastest in decades, because of additional £200bn sitting in customer and company bank accounts in the UK according to the estimates of Barclays as well as the successful vaccine rollout, Staley said.
A more confident view on how many of its loans would be repaid was almost solely responsible for the surge in Barclays’ latest profits.
During the first quarter last year, Barclays had set aside an amount of more than £2bn as a cover for risks of bad loans not being paid because of the pandemic related economic slump. This time the bank has set aside only £55m.
Barclays has also interestingly chose not to adjust previous estimates of bad loan previsions, unlike other big banks in the UK and US, but also indicated that it would do so in the future. Analysts are also keen to see the portion of the bank’s total £9bn fund for future estimated debt defaults would it be prepared for reconsidering.
Assuming the worst regarding future defaults is sometimes called “stuffing the cookie jar” – a jar that can be raided when needed to boost future earnings. All banks do this to a greater or lesser degree,
However for Staley, the overall global economic picture seems to be improving even as there are pandemic related disasters happening in developing economies such as India and new lockdowns being impose din developed economies such as Japan.
He however accepted that desperately challenging circumstances have been faced by many business sectors such as hospitality and leisure and that and it is still unclear as to the how many of the five million workers who are still on furlough will actually return back to full time jobs.
However there are many businesses who would oppose the rosy picture painted by Staley about the economic future of the UK.
It is probably wrong to talk in terms of an economic boom after we have seen the biggest economic downturn in 300 years, but Staley is in tune with his US counterparts when he hopes and expects that, for him and his many business customers, the worst is behind us.
(Adapted from BBC.com)