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Winner takes all

Michael Prest
  16th December 2006  —  Issue 129
Since "big bang," the City has boomed. But how has it been for everyone else?

The City of London has never been a modest place. Nonetheless, the waves of self-congratulation that greeted the 20th anniversary of “big bang,” when the stock exchange’s old restrictive practices were swept away on 27th October 1986, were still a little excessive. The story that the City, especially since 1986, has become one of Britain’s great success stories, a real world leader which inspires envy among foreigners, was repeated ad nauseam. Hardly a dissenting voice was heard.

There is no question that the City is a colossus, looming over national economic life. Financial services account for 8 per cent of the economy. Add in business services, and the total comes to 12 per cent. Some 330,000 people do “City-type” work in London. The City is now far and away the world’s biggest international financial centre, as well as its most innovative (see Henry Tricks’s report on hedge funds).

But a few caveats are required. For a start, memories of 1986 are selective. I was there (as a journalist), and the chief feeling was apprehension. No one knew what would happen when foreign firms were allowed in and the distinction between order-takers (stockbrokers) and traders (jobbers) was abolished. Many did not want the changes, which were forced on them by the abolition of exchange controls in 1979 and the restrictive practices case the Office of Fair Trading (OFT) brought against the stock exchange.

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By Michael Prest

Michael Prest is contributing editor to breakingviews.com

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