Varley takes helm at Barclays as Barrett moves to chairman

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Barclays yesterday ended months of speculation about who would lead the high street banking giant, saying its chief executive, Matt Barrett, would step into the chairman's role at the end of next year and would be replaced by John Varley, currently finance director.

The reshuffle surprised many in the City after weeks of intense speculation about the machinations inside Barclays' boardroom. Until just a few days ago, many thought Mr Barrett had decided not to succeed Sir Peter Middleton as chairman. Mr Varley had also not emerged until yesterday as the definite heir apparent to the chief executive's role due to a very close contest between himself and another senior colleague, Bob Diamond, who runs the investment banking arm.

However, yesterday the ebullient Mr Barrett denied his gaze had wandered, possibly back to his native Canada. He said: "They would have to beat me with a stick to get me to go. I love this job and this is the best city in the world."

While Mr Barrett is admired in the City, his move into the chairman's role contravenes recent guidelines on corporate governance laid down by Derek Higgs, who concluded that the elevation of a chief executive to the role of chairman was not a good idea. Sir Peter said Barclays was adhering to its basic principle that "the company is being run in the best interests of shareholders".

Mr Varley is a veteran of Barclays, having worked there for 20 years, including periods of turmoil such as the rapid turnover of chief executives in the 1990s and the devastating effect of the housing crash and the collapse of Russian bonds on Barclays' finances.

The 47-year-old, who is married to a member of one of the founding families of the bank, the Peases, has headed up a series of divisions, including the old merchant banking business, BZW.

From January, when Mr Varley will spend a year as deputy chief executive before moving into the top job, his basic pay will rise from £475,000 to £700,000 and his estimated bonus will be another £700,000. Barclays' shares edged up 4.25p to 509.75p. Investors were broadly positive about the announcement. One said: "He's a safe pair of hands."

Sir Peter said of the management announcement, which also includes appointing four other stars to the board: "You shouldn't expect great gyrations or lurches. We are very comfortable with our successful strategy." Mr Varley also indicated he would not strike out in a radically different strategic direction. He said: "Our performance in the first half was sparkling, and those efforts were born of a team, not an individual."

Sir Peter admitted the appointment had "disappointed" Mr Diamond and prompted speculation that he would not stay on with the group.