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Barclay's Boss says UK is set to see biggest economic boom since 1948


Jes Staley, banking firm Barclay’s boss, has recently stated in an interview that the UK is set to see its biggest economic boom since 1948.


This is large predicted boom is compared to the UK’s economic growth right after the second world war, meaning the figure is somewhat inflated.


This is because the war resulted in massive destruction of physical capital as well as massive human loss which overall led to a contraction in the long-run productive capacity of the UK and other EU countries.


For this reason, the UK economy would have seen a large contraction in economic growth in 1948, therefore, any comparison between now and that year will be extremely skewed as the UK economy had to recover and bounce back.


One Twitter user illustrated this concept by essentially saying “it’s like losing £100 and then finding £100 again, sure you’ve gained £100, but realistically you have made no overall progress.”


As well as a positive outlook on the UK economy, Barclays themselves have revealed their profits for the first three months of 2021.


The firm stated that they had doubled from the previous year to a whopping £2.4 billion. This increase in profits has likely been a result of increased consumer and business confidence in recent months as the UK governments roadmap has been an essential piece of forwarding guidance that was necessary to reduce uncertainty.


This increase in confidence is shown as recent ONS data has illustrated that the number of credit card purchases for delayable goods has drastically increased, meaning consumers are more confident when it comes to acquiring debt.


This is particularly significant as consumers who are willing to take on debt are consumers who are confident in their job security as they believe they will have the income necessary in the future to pay back said debts.


Additionally, Barclay’s profits may have increased as the bank cuts back on physical banking branches as online banking has become the preferred alternative among customers due to its ease.


The firm has also collected savings during vaccination programmes, meaning that once the UK economy opens up after its COVID-19 shock, the banking firm will be able to bounce back and provide service to economic agents as it will have enough cash saved to ensure that it can lend out to its customers.


This cash has been mainly saved by consumers and businesses however as Barclays reports that it is currently sitting on £200 billion, because of this abundance, the UK economy is predicted to see its strongest economic bounceback.


At the same time, due to the forecasted bounceback, Barclay’s predicts that it can pay back a great majority of its loans, further increasing the bank’s positive outlook and overall stability.


However, the banking firm does have some speculation and uncertainty around the UK’s economy regarding the number of workers on the Furlough scheme, a job retention scheme designed to keep workers employed by subsidising 80% of their wages.


The bank reported that it is unsure of how many Furloughed workers will actually be returning to full-time work.


This is significant as those on Furlough may slow down the UK’s economic bounceback due to their lowered disposable income as only 80% of it is subsidised.


Furthermore, the majority of Furlough payments come from the Hospitality, retail and tourism sectors, which, because of their high supply of labour, have low wage rates.


For this reason, workers in these sectors may not have saved up as much due to their low wage compared to their counterparts, therefore, due to their lacking safety net, these furloughed workers may choose to save even more in an effort to increase their financial security.


This will lead to a lower increase in aggregate demand as consumption in the economy will decrease due to increased withdrawals as the marginal propensity to save consumers increases.


Therefore, although the UK economy will see a strong bounceback in the coming months, it may not be as high as anticipated due to workers on Furlough prioritising their financial security as for these individuals, uncertainty may still be high.

 

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Written by Hubert Kucharski

Research compiled by Jonas Theaker


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