Barclays expects 'deep' recession

The UK recession will be "deep and prolonged", the chief executive of Barclays told shareholders at the bank's annual general meeting.

"It seems likely that we're going to be living in difficult times, at least for another year," John Varley said.

The warning is in contrast with the chancellor's forecast that economic recovery will begin later this year.

Barclays also said it aims to help UK households and businesses by increasing its lending by £11bn this year.

Mr Varley said: "We acknowledge the role we can play in helping restore sustainable growth to the UK economy, including by supplying credit, appropriately, to customers affected by the withdrawal of certain lenders from the market."

'Thunder and lightning'

In Wednesday's Budget, the Treasury predicted that the economy would shrink by 3.5% this year, but would grow by 1.25% in 2010.

But Mr Varley warned the banking industry could face more troubled times.

"Although it seems the worst of the financial crisis in the banking sector is now behind us, there will no doubt be further thunder and lightning from time to time," he said.

However, he added that Barclays had had a "good start to the year" and that its financial performance in the first quarter was "well ahead" of the first three months of last year.

Board re-election

At the meeting, the entire board stood for re-election.

Shareholders voted to re-elect all board members, while 83.7% voted in favour of re-electing chairman Marcus Agius.


Your board is keenly aware that relations with a number of Barclays' larger shareholders... have been put under strain during the year as a result of the capital raising

Marcus Agius, Barclays chairman
All directors offered themselves for re-election in November, rather than just a third of them as would normally occur, after announcing a plan to rise £7bn from Middle Eastern investors.

However, the fundraising plan was controversial as the high-yielding securities, offered to Middle Eastern investors, were not initially made available to other institutional investors.

Some shareholders expressed their anger by voting against the chairman's re-election.

Mr Agius acknowledged at the meeting that relations with a number of shareholders had been "put under strain" as a result of the capital raising.

Pay review

Meanwhile, the chairman of the bank's remuneration committee, Sir Richard Broadbent, said pay policies do not appear to have affected banks' experiences.

"The different experience of different banks in the current crisis does not seem closely related to remuneration policies," he said.

"Strategy, operational management and risk control all appear to play a much larger role."

Barclays is currently reviewing its remuneration policy for 2009.

In 2008, Barclays' profits fell by 14% while variable remuneration fell by 48%, he said, meaning that Barclays employees at all levels lost in total £2bn of personal wealth in 2007 and 2008