John Varley, the chief executive of Barclays Bank, believes the recession "feels deep and prolonged" and will last at least another year – a stark contrast with the more upbeat forecasts delivered by Alistair Darling in Wednesday's Budget.
The gloomy assessment, delivered at the bank's annual general meeting yesterday, was made as the CBI published new figures showing that British industry faces the most difficult conditions for three decades.
Mr Varley said that the UK economy was now facing a crisis that was "equally ugly" to that which the banking sector had suffered. "This recession feels deep and prolonged," he said. "We need to be realistic about when the inflection point will come... we're going to be living in difficult times, at least for another year."
Mr Varley's warning will disappoint the Chancellor, who is predicting that an economic recovery will begin later this year and accelerate in 2010. However, there was little sign of the slowdown bottoming out in the latest CBI quarterly industrial trends survey, which yesterday revealed that manufacturing output in the first three months of 2009 fell at its fastest rate since records began in 1975, as companies frantically try to balance supply against collapsing demand.
Some 60 per cent of manufacturers reported falling order books, the worst response since October 1980, as domestic demand dropped back to levels also not seen since 1980.
Despite aggressive running down of inventories, stock levels are still high and heavy destocking is expected to continue over the coming quarter, the business group warned. It said 76 per cent of manufacturers are now working below capacity – the highest proportion since 1983 – and that both investment and training are still being axed.
Redundancies are also continuing to climb alarmingly. Employment fell as its sharpest rate since October 1991, with only a slightly slower pace of cuts predicted for the current quarter. Some 62,000 manufacturing jobs were lost in the first three months of 2009 according to CBI estimates, with another 51,000 to go by the end of June.
Although businesses expect the pace of deterioration in the sector to steady over the next quarter – and business confidence from January to March declined at a slightly slower rate than over the previous three months – any improvements are from a low base.
However, Mr Varley's presentation of Barclays' own trading fortunes fitted arguments made by several analysts in recent weeks that banks could lead the global economy out of recession.
Barclays said its first-quarter financial performance was "well ahead" of the same period last year, and confirmed an intention to resume dividend payments in the second half of the year. It also announced plans to lend an extra £11bn this year – a 6 per cent rise on 2008 – half of which is for mortgages and the other half for business loans.
Barclays' chairman, Marcus Agius, apologised for the suffering caused by ructions that saw the bank's share price drop from more than 460p in May to just 50p eight months later. "I would like to express my sincere regret, and that of all my board colleagues, for the financial hardship suffered by our shareholders over the last year," Mr Agius said.
There are some significant bridges to rebuild after last year's £7bn fundraising deal with Middle Eastern investors caused outrage among existing shareholders, who were furious that their pre-emption rights had been ignored.
In response to the criticism, Barclays promised that its entire board would stand for re-election at yesterday's AGM. And while nearly all were returned with a majority barely a few per cent off unanimous, more than 16 per cent of investors registered their disapproval by voting against Mr Agius continuing as the bank's chairman.Reuse content