Was the Big Bang good for the City of London and Britain?

- Telegraph

10/04/2014 12:15

Was the Big Bang good for the City of London and Britain?
The stock market was deregulated 25 years ago today, reprising the City’s golden age, but the 1980s boom is ultimately responsible for our current bust.

Bulls and bears: London’s Stock Exchange before 1986 Photo: ALAMY

By David Kynaston
8:27PM BST 26 Oct 2011

The eurozone unravelling, the governor of the Bank of England announcing the most serious financial crisis since the 1930s, Tent City dug in next to St Paul’s – it is piquant timing for today’s 25th anniversary of the City of London’s Big Bang. Researching and writing the City’s history, I used to find potential readers confronted by a double barrier: the perception that the City was not just incomprehensible but also boring, reflecting, as that old Monty Python sketch had it, “the dull life of a City stockbroker”. The City probably remains baffling to most people, but since the crash of 2008 no one can deny its interest and importance. Big Bang itself, on October 27, 1986, coincided with the coming of screen trading, but was essentially about deregulating the Stock Exchange. Above all, it enabled 100 per cent outside ownership of member firms – a move enforced by the Thatcher government on a largely reluctant City, so that London could operate on a modern, properly capitalised basis as an international financial centre. For those with a historical perspective, undoubtedly including Margaret Thatcher’s chancellor, Nigel Lawson, the gleam in the eye was the hope of reprising the City’s golden age, when London was the
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funding new hospitals and schools and much else besides. the City proved an almost miraculous (and relatively uncomplaining) cash cow. followed by the floating of exchange rates and abolition of exchange controls. Panmure Gordon and Wedd Durlacher. The arrival of the Euromarkets in the 1960s. disbursing capital and credit around the globe. the maximisation of profits. My answer was mixed. and. society seen as an organic whole imbued with reciprocal obligations) and those of free-market capitalism (unleashing nostalgia-free forces of creative destruction). in its human composition a far more diverse and meritocratic place than the old City. But at the same time. began the re-internationalisation of the City. but Big Bang took it much further: a legion of deep-pocketed commercial banks. quite unlike the old City’s salutary partnership structure. which in its totality raised the fundamental philosophical dilemma for the Right that still remains unresolved: how to reconcile the instincts of conservatism (the past and present held in trust for the future. Phillips & Drew. During the 1990s. http://www. for the traders. and remains mixed. I admire the energy and drive of the new City.co. the annual lure of the seven-figure bonus has seen them systematically engaged in ludicrously oneway bets – one-way because they are not personally responsible for the losses (“other people’s money”). The gleam came to fruition.Was the Big Bang good for the City of London and Britain? . while simultaneously ambitious American investment banks such as Goldman Sachs beefed up their London presence and would rapidly supplant the British merchant banks. the dominant investment banking culture – has had some seriously corrosive and damaging effects. paternalism and the long.Telegraph 10/04/2014 12:15 greatest financial centre the world had ever seen. leisurely lunch. Long-term relationship banking has been replaced by short-term transactional banking. I would find myself wondering whether the new City that had emerged out of Big Bang was really so much better than the old City. as all this went on. has meant an increasing reliance on intrinsically risky proprietary trading. often involving opportunistic financial engineering. bought up long-established broking and jobbing firms such as James Capel.uk/finance/financialcrisis/8850654/Was-the-Big-Bang-good-for-the-City-of-London-and-Britain. where for so long whom you knew counted rather than what you knew. neither Frankfurt nor Paris mounted a credible challenge to London as top European financial centre. But of course. by the new century. Yet. the Americanisation of the City – above all. in pursuit of shareholder value.telegraph. traditionally the City’s crème de la crème. before the guns of August 1914 changed everything. it was not just in the old City that the triumph of Thatcherism doomed a traditional ethos of loyalty. often foreign. The City revolution of the 1980s was part of a wider revolution. and for successive British governments.html Page 2 of 4 . London was ahead of both New York and Tokyo in global terms.

Nowhere is apparently more Thatcherite than the new City. might have made of the unrecognisable world that his daughter had brought into being. most of them are so able and so intelligent that it would be comforting to think they grasp the irresistible logic. Earlier this year The Daily Telegraph ran an illuminating interview with Mervyn King. and stop ducking the challenge of full engagement with the media. In my view the City.co. but now. abandon the mastersof-the-universe syndrome. urgently needs to do several things: focus more whole-heartedly on the British economy (including the manufacturing sector). Conservative-voting people who until quite recently had thought little about the City and largely taken it for granted. living in a bubble far removed from the everyday concerns of most people and sucking in many of the brightest and best. and more generally. Are the City’s leaders capable of initiating and implementing a serious reform agenda? In the new meritocracy. perhaps especially with those middle-class. Such a situation strikes me as neither desirable nor sustainable.telegraph. the greatest figure of the post-war City. a stockbroker in Sevenoaks. After all.Telegraph 10/04/2014 12:15 Near the end of John Campbell’s superb biography of Thatcher. a solicitor in Northampton was not so utterly different from. who lamented modern trends in financial services: too much emphasis on making money out of customers. Alderman Roberts of Grantham. appreciably more Thatcherite than when she was in her prime. self-contained silos and wait for http://www. that the banker or comparable financial professional should be like a physician in relation to his client. How resonant is the King critique? Given all the anecdotal and other evidence about the deep unpopularity of the City since 2008 – when the banks had to be bailed out by the taxpayer. the social and financial position of. seek to fulfil the maxim of Siegmund Warburg. productive activities rather than trading for its own sake. Their alternative is to stay in their large. say.uk/finance/financialcrisis/8850654/Was-the-Big-Bang-good-for-the-City-of-London-and-Britain. too little on giving them a genuine service. a generation ago. though without abandoning its international role. and the malign impact of casino trading. two decades on.html Page 3 of 4 . who got so little in return but instead had to watch new rounds of the City paying itself handsome bonuses – it is surely plausible that such a critique strikes a chord.Was the Big Bang good for the City of London and Britain? . the City (including Canary Wharf) feels like an absurdly privileged offshore island. say. a world that is now. make itself fully accountable to the political system. he imagines what her father. recalibrate remuneration to sensible levels and (in the case of bonuses) a deferred basis. if it wishes to stop being contra mundum. It was an arresting interview because of the almost unprecedented spectacle of the governor of the Bank of England so explicitly attacking City values (or lack of them). concentrate on useful.

published by Chatto on November 3 (RRP £30) is available from Telegraph Books for £26 plus £1. David Kynaston’s 'City of London: The History’. To pre-order your copy please call 0844 871 1515 or go to books.uk/finance/financialcrisis/8850654/Was-the-Big-Bang-good-for-the-City-of-London-and-Britain.Was the Big Bang good for the City of London and Britain? . probably crudely and with harmful unintended consequences.html Page 4 of 4 .uk How we moderate © Copyright of Telegraph Media Group Limited 2014 http://www.co.25p p&p.telegraph. this is a time to see the bigger picture. Like the Duke of Wellington with the Reform Bill.Telegraph 10/04/2014 12:15 the popular pressure to continue to build and the politicians eventually to act. like de Gaulle with Algeria.telegraph. like Nixon with China.co.