The head of Barclays bank predicted today that the economic gloom gripping the UK would deepen further, with house prices set to tumble as unemployment figures soar.
John Varley, Group Chief Executive of Barclays, painted a bleak outlook predicting that property prices could fall by up to 30 per cent.
In an interview with Jeff Randall Live on Sky News, the bank boss also criticised mortgage borrowing levels over the last decade.
The comments will be seen as highly significant in the City as they come from such an eminent figure.
Mr Varley warned that the UK was only "halfway" through the slump with house prices set for even greater falls.
He said: "Our view was that from the top to the bottom, you would see a fall of something like 25 to 30 per cent.
"I suspect we're about halfway through that at the moment. I mean that slowdown, the negative house price inflation started in 2007, it's accelerated in 2008.
"We're probably about halfway through that period, so in other words we've got another 10 to 15 per cent to fall between now and the end of next year. That would be our assessment."
He said that the level of mortgage borrowing over the last 10 years in which customers were offered loans far greater than their incomes would come to be seen as an "anomaly".
He explained: "I think the last 10 years will be seen as an anomaly rather than a normalcy.
"The loan to value ratios, as you know, were available at 100 per cent or 115 per cent or 125 per cent of the value of the house." He added that the lending policies of the last decade would be viewed in time as "madness".
Mr Varley's bleak prediction extended into the jobs market.
He said: "Our view is that unemployment will rise. Unemployment is likely to go north of 7 per cent over the course of the next 12 months or so, it might be as high as 7.5 per cent.
"I think an additional 700,000 people unemployed over the course of the next 12 months is certainly possible to contemplate."
He added: "The unemployment tends to be a lagging feature, a lagging indicator and it is possible that the unemployment will be worse in 2010 for a period than in 2009.
"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.
"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."
The UK economy caught a cold after the credit crunch first bit in the US and Mr Varley said that equally, once house prices begin to recover stateside, then the worst of the credit crunch would be over.
He also said that banks had to act with "humility" and accept their part in the economic downturn.
He explained: "I think if you look at the players who were involved in what's happened to the world, I think there are quite a lot of players.
"They would include central banks, they would include governments, but they would certainly include the banks. And the banks have to be prepared to have the humility to acknowledge that and accept it and to say sorry.
"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 cited Barclay's desire for choice as the reason why his bank rejected a financial handout when many of the UK's leading banks took advantage of a government bailout.
He explained: "We want choice. I do attach, from the point of view of value for our shareholders, significant importance to independence.
"And our view is simply this, that if British taxpayer's money is going to be deployed in a bank as a result of the Government owning shares in that bank, then a big part of the agenda of that bank and a lot of that incremental capital has to be directed at the UK.
"Of course it does because it's British taxpayers' money. Now Barclays is more than a UK bank.
"If you look at the Barclays of today of course our UK business is extremely important to us but we employ more people outside the United Kingdom than inside the United Kingdom, we have more customers outside the United Kingdom than inside the United Kingdom, and it's very important to me that that agenda of growth outside the United Kingdom is unimpaired."Reuse content