ONE of the leading City analysts has addressed a select group of local intermediaries, CSPs and financial experts at a breakfast meeting this morning (Tuesday) at the launch of a new service by Barclays Wealth.

Henk Potts, acclaimed as one of the “media stars” in the financial world, is one of the most “in demand” analysts in Europe and before the start of today’s 8am breakfast meeting had already conducted a 5am interview with radio stations in Switzerland and Monaco before speaking at the Sefton Hotel.

He gave a straight-talking and in-depth analysis of what is happening all over the world and posed some thought-provoking comments and also answered some important questions about the recovery of the world economy.

The theme of his presentation centred around three questions: 1) is the economic recovery assured?  2) can the rally in the markets continue? and 3) which areas offer the greatest potential?

“Everyone has had to work incredibly hard in this last twelve months,” he said. “But the major question is whether the recovery can be stabilised and if current monetary policies will defrost the frozen poles of the world’s financial system.”

He said that it appeared that the intervention of governments and authorities had been rewarded, so far, and that in the US particularly there were signs that the massive $300 billion investment programme had halted the “horrendous” contraction of the economy which had resulted in the housing market going down 35% and 7.2 million people losing their jobs since 2008.

Recovery had recently seen the creation of 290,000 jobs and predictions showed a 3% growth in the US economy this year and a further 3.1% in 2011. “The Euro zone, however, is much tougher,” he said. “There was a 4.1% retraction in 2009 and in some cases, such as Spain where there is 20% unemployment, the figures are shocking. 

“Some of the blame for this can be aimed at the Euro Central Bank, but there are signs of things improving slowly and there was some growth reported in the third quarter of last year in France and Germany. There should be some overall growth during 2010 but business investment is weak and European companies have been much slower to cut jobs than the UK and the US. Growth during 2010 should be around 1.3%.”

In the UK he said the recession had been “miserable” with six successive quarters showing a decline in growth. “Credit is still very tight and we are in for a huge bout of fiscal tightening.” He was also concerned that UK households were much deeper in debt that in the Euro zone and the US, placing pressure on individuals for the next few years. However, he said that the rate of inflation was coming down and that interest rates looked like staying “benign” but could rise to as much as 3% during 2011.

In China, it’s another story, he said. “The Chinese have an aggressive attitude and there has been a significant growth pattern, showing 11.9% in the first quarter of 2010. China will continue to grow strongly and will make a significant contribution to global growth. Overall growth is expected to be 9.9% during 2010 and a further 9% in 2011.”

Henk Potts had some words of warning, however. “There are clearly some risks. There is a big bill to pay for solutions and we are in a different era. It’s ‘goodbye financial crisis, hello fiscal crisis.’ The second half of 2009 saw the UK’s most protracted period of fiscal retraction in history and it will continue for the next five years.”

He said pay growth would be slower and interest rates would increase slowly but it was now “time to recalibrate” in terms of the way the world operates during such a crisis. He also warned there was a risk of a “double-dip recession” if governments tried to get out of the situation too quickly. “There are some huge bills to be paid and there is the potential for policy mistakes.  . . Companies are leaner and meaner and there is definitely a brighter corporate outlook and profitability is slowly coming back.”

He further warned that the markets would become more volatile during the rest of 2010 and felt strongly that smaller companies would see a stronger comeback during the period. “It’s easy to understand why investors are nervous all around the world,” he added, and pointed to some areas where success might be achieved, such as commodities and longer-term Government bonds.

But he advised caution on gold. There is a “bullion bubble”, he said. But he felt that even though investors bought more gold than jewellery demand during 2009 and the price had recently reached a new all-time high, that there was a case for investors to reduce exposure to the gold markets “in case of a major shock”.

Summarising, he felt that it was still not too late for investment in developing markets and opportunities in the commodity markets.

David Stanley, Barclays Wealth Director, thanked Henk Potts for his presentation and went on to explain the launch of the bank’s new service.

The Intermediary & Institutional Wealth solutions team (IIWS) has been developed for clients who have complex and specialist banking and investment requirements and has been created following feedback from clients. It will look after the top tier 100 intermediary clients.

The team of eleven includes nine new appointments which Barclays says is “unusual” in the current economic climate, but which emphasises the importance the bank attaches to the new service.

“Business is changing rapidly an clients now require more specific solutions tailored to their complex needs,” said David Stanley. “Clients today require more strategic dialogue with their bank and need to see that their bank understands their needs and can work with them to achieve their goals.

“We recognise the importance to our clients of delivering superior end-to-end service. Having professional relationship managers is just part of this service and so they will be supported by a dedicated middle and back office.

“This will include a proactive technical support team to deliver a range of online and bespoke technological solutions and a dedicated payment and service team. We are confident that the new IIWS team will offer clients an unrivalled service.

“Our new service will enable us to manage transactions quicker, and to provide answers quicker. There has never been a better time to speak to your bank.”