Business News

Archbishop of Canterbury warns the UK is in a 'depression'


The economy looks to be in such a bad state that even the Archbishop of Canterbury is issuing dire proclamations about it.

The Rt Rev Justin Welby, who took over the role last month, said Britain was in a "depression" and that it would take something "very major" to restore confidence in the UK's battered economy and drag the country out of the mire.

He suggested the Government may need to recapitalise at least one major bank, and urged the creation of regional banks.

The comments - days before key GDP data is expected to show the economy remains stalled - came at a Westminster panel discussion on the financial crisis organised by the Bible Society.

"Economic crises are a major problem when they are severe," the Archbishop said. "When they are accompanied by a financial crisis and a breakdown in confidence then they become a generational problem.



The Archbishop said no one had all the answers to dealing with the crisis, but a key move to rebuild confidence was making sure people could no longer "drift" into senior banking positions.

The former oil executive, who is serving on the parliamentary commission into banking, argued that the main mistakes made by bankers before the credit crunch had been "unsophisticated".

He said he had been disappointed to discover during evidence sessions that "bankers are not nearly as bad as one hoped that they would be".


"Those two errors alone are quite enough to bankrupt any bank. They are not sophisticated errors, they are the reality."

He pointed out that HBOS had lost 10% of its total loan portfolio, and 30% of its portfolio in Australia, before having to be rescued.

"That simply is going to bring anyone down," he added.

The Archbishop joked that he became group treasurer at Enterprise Oil in the 1980s despite being "innumerate".

"Banking is highly complex in management and thus the first thing that needs to happen to restore confidence is to begin a move, that will take a generation or more to complete, towards professional standards in management," he said.

"We cannot go on with banking being essentially something that people drift into in the way that I drifted into being a group treasurer."

Mr Welby said problems were created when banks became distant from the communities they served, and insisted that "at least part of the banking system should be local".

He said the simplest solution to recreate a local banking system was "recapitalising at least one of our major banks and breaking it up into regional banks".

He also cautioned against allowing the banking system to become too concentrated in the mistaken belief that it was safer.

"As a bank, you can be big and simple or small and complicated, and do well. If you get big and complicated, you become unmanageable," he said.