People are finally spending more on their cards

Is this the sign we've been waiting for?

I may just have spoken to the most optimistic and cheery senior UK-based banker for many a year.

Dave Chan, CEO of Barclaycard Europe, is not just chirpy about the prospects for UK plc; he says that there is evidence going back to the second quarter of the year that we may have turned a corner. In short, people are spending more on their cards.

In May and June, "nominal spend" – that is expenditure taking account of inflation – of Barclaycard cardholders rose for four months in a row for the first time in three years. Given the importance of consumer spending as an engine of growth and with expenditure now on a gentle upward trend, we may indeed be witnessing the recovery starting to gain momentum.

That is however only part of the story. The clever number-crunchers at Barclays have been analysing just what exactly we are using our cards to purchase. There are signs that discretionary expenditure is rising including purchases such as foreign holidays Perhaps the real clincher to back up Chan’s optimism relates to card expenditure on home improvements.

In the past couple of months he says that there has been a big uplift in expenditure in this sector.

Meantime, UK unemployment remains stubbornly high at 7.8 per cent. If the Bank of England forecasts for GDP growth are accurate – and here it has a decidedly mixed track record – we will only enjoy growth of 1.4 per cent this year and 2.3 per cent next year.

For those of us old enough to have lived through economic upturns following past recessions, such relatively low rates of growth are way below the growth levels witnessed during the Thatcher second term and Blair’s first term.

The chances of UK unemployment falling below 7 per cent and the trigger for a change in UK monetary policy – that means higher interest rates to you and me – is slim in the next three years. That inevitably will impact the prospects for the share prices of the major UK banks.

As for home improvements major players, such as B&Q’s parent Kingfisher, there may be renewed interest in how its share price performs. Analysts following Kingfisher are divided with six rating the stock a sell, seven say hold with 13 recommending a buy.

Time will tell if Chan’s grounds for optimism are well founded.

I am glad to report, that at no time during the course of a lengthy conversation did he use the phrase “green shoots” (Norman Lamont circa the 1991 recession).

A handful of credit cards. Photograph: Getty Images

Douglas Blakey is the editor of Retail Banker International

Photo: Getty
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Theresa May's magic money tree is growing in Northern Ireland

Her £1bn deal with the DUP could make it even harder to push through cuts in the rest of the UK.

Going, going, gone...sold to the dark-haired woman from Enniskillen! Theresa May has signed a two-year deal with Arlene Foster, the DUP's leader, to keep her in office. The price? A cool £1bn and the extension of the military covenant to Northern Ireland.

The deal will have reverberations both across the United Kingdom and Northern Ireland specifically. To take the latter first – the amount spent in Northern Ireland in 2016/17 was just under £10bn. A five point increase in spending on health, education and roads is a fairly large feather in anyone's cap.

It transforms the picture as far as the fraught negotiations over restoring power-sharing goes. It increases the pressure on Sinn Féin to restore power-sharing so they can help decide exactly where the money goes. And if there's another election, it means that Arlene Foster goes into it not as the woman who oversaw the wasteful RHI scheme (a renewable energy programme that because of its poor drafting saw farmers paid to heat empty rooms) but as the negotiator who bagged an extra £1bn for Northern Ireland. 

Across the United Kingdom, the optics are less good for the (nominal) senior partner to the deal.

"May buys DUP support with £1 billion 'bung" is the Times"£1bn for DUP is 'just the start" is the Telegraph's splash, and their Scottish edition is worse: "Fury at 'grubby' deal with DUP". With friends like this, who needs the Guardian? (They've gone for "May hands £1bn bonanza to DUP to cling on at No 10" as their splash, FYI.) 

Not to be outdone, the Mirror opts for "May's £1bn bribe to crackpots" while the Scotsman goes for "£100 million per vote: The price of power".  Rounding off the set, the Evening Standard has mocked Foster up as Dr Evil and Theresa May as Mini-Me on its front page. The headline? "I demand the sum of....one billion pounds!"   

Of course, in terms of what the government spends, £1bn is much ado about nothing. (To put it in perspective, the total budget across the UK is £770bn or thereabouts, debt interest around £40bn, the deficit close to £76bn).

But only a few weeks ago Theresa May was telling a nurse that the reason she couldn't get a pay rise is that there is "no magic money tree". Now that magic money tree is growing freely in Northern Ireland. The Conservatives have been struggling to get further cuts through as it is – just look at the row over tax credits, or the anger at school cuts in the election – but now any further cuts in England, Scotland and Wales will rub up against the inevitable comeback not only from the opposition parties but the voters: "But you've got money to spend in Northern Ireland!"

(That £1bn is relatively small probably makes matters worse – an outlay per DUP MP that you might expect a world-class football club to spend on a quality player. It's tangible, rather like that £350m for the NHS. £30bn? That's just money.)

For Labour, who have spent the last seven years arguing, with varying degrees of effectiveness that austerity is a choice, it's as close to an open goal as you can imagine. Theresa May's new government is now stable – but it's an open question as to how long it will take her party to feel strong again.

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.

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