by Martin Armstrong, Armstrong Economics:
Britain’s four largest banks have reported that clients have withdrawn £78 billion, marking the steepest bank run since 2018. NatWest, Barclays, Lloyds, and HSBC all reported significant withdrawals in the 12 months leading up to June 2023. Worsening matters, the House of Commons Treasury Committee accused the four banks of “blatant profiteering” and “squeezing higher profits from their loyal savings customers.” The people simply have lost confidence in the banks.
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The Bank of England (BoE) all but admitted the UK was officially in a recession back in September 2022. Bank Governor Andrew Bailey stated there was nothing the central bank could do to prevent a recession at that stage. The central bank raised rates for the 14th time at its last meeting, bringing the borrowing rate to 5.25%, which marks the highest level since February 2008. Those with two-year mortgages have felt the pressure as the average fixed rate now sits at 6.85% compares to 3.95% last August. Bailey said “depending on what the evidence on the economy indicates, we might need to raise interest rates again but that’s not certain,” worsening confidence in the central bank.
The big four, as they are known, have passed their costs onto the consumers and then some. Unite analysis found in March 2023 that these institutions managed to profit an additional £7 billion due rising rates. Yet, the ONS found that households were spending 1.5 percentage points more on financial services, a cost that continues to rise. The financial sector is coming out as the winner in all of this as workers in the sector have seen their incomes nearly triple since 2021. Additionally, the big four have seen a 42% rise in profits since the pandemic and have been aided by government tax cuts.
Unite’s analysis concluded:
“Unite’s research shows how the banks have already made billions in extra profit from interest rate rises. If the MPC raises rates again they stand to gain even more. Banks treat these rises as a licence to pick the pockets of householders across Britain. “Unbridled profiteering is taking billions of pounds away from workers and communities and putting it into the hands of corporate Britain. Last year, the profits of the big four banks soared to an eye watering £33 billion. Politicians need to wake up. It’s only by taking on runaway profiteering that we can end the cost of living crisis.”
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