When foreign financiers stripped London of its snob class, the money woke up. But to stay slick, the city needs to regain an old honour systemby Edward Chancellor / July 20, 2001 / Leave a comment
in the winter of 1958, the City of London witnessed its first large-scale hostile bid. British Aluminium, chaired by a former wartime Chief of Air Staff and managed by the son of a former governor of the Bank of England, came under siege from a consortium of Reynolds Metals, an American company, and the British industrial firm, Tube Investments. Reynolds was advised by the upstart merchant-banking firm of SG Warburg. Despite a rearguard action by the City establishment, British Aluminium succumbed. The day after the bid was announced, the prime minister Harold Macmillan wryly observed, “It’s becoming rather a gentleman v players affair.”
David Kynaston’s fourth volume in his history of the City of London chronicles the players’ victory. Despite the Attlee government’s nationalisation of the Bank of England in 1946, the City’s institutions and values emerged from the second world war essentially unchanged. Governors of the Bank of England still came from the City aristocracy and sought to defend their historic privileges. The merchant and clearing bankers continued to do the governor’s bidding, paying special attention to any raising of the famous eyebrow. The failure of the Labour government to make deep inroads into the City is ascribed by Kynaston to the socialists’ ignorance of how its arcane institutions functioned. Labour’s priorities were industrial and the world of finance was deemed a necessary evil, not to be examined too closely.
The post-war City remained remarkably hierarchical; more like a public school than a club. Its leaders were men such as Lord Kindersley of Lazards, who retired in 1953 in his eighties, to be succeeded by his son. George Soros left for New York after a short stint in the City in the 1950s. “It was,” he wrote, “almost impossible to transact business without having a prior relationship.”
It was not good form to be seen to be hungry. On his retirement in 1970, Sir Antony Hornby, a senior partner at the broker Cazenoves, laid out the rules of the club to his firm’s younger members: “One must be generous as well as competitive. One cannot prosper at other people’s expense. One’s friends and even competitors must be allowed to prosper as well.”
Such an approach had certain virtues. Because City relationships were fundamentally personal, and based on a common code of conduct, there were fewer scandals than might otherwise have been expected. Losses could also be mitigated. When…