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30 years after big bang, will Brexit cost City of London its status?

30 years after big bang, will Brexit cost City of London its status?

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Richard Lumb, chief executive of Accenture’s global financial services business, said it also democratised share ownership – and brought in £65bn of tax revenues. This was one of the benefits of the bonus culture that took over the City in the wake of the big bang.

“Brexit will change the City in some ways,” said Lumb. “But I’m more optimistic than pessimistic.” He pointed to factors such as the skilled workforce in London and the tax and legal environment.

Anniversary is tinged with anxiety as other cities vie to replace London as global financial centre

Thursday will mark 30 years since the London Stock Exchange swept away centuries of tradition and beckoned in the modern, global City of London. It signalled the end of leisurely gentleman’s hours and liquid lunches, ushering in computer screens and many more American accents in the once closed shop of London’s financial markets.

But the vote to leave the EU earlier this year means the reminiscing sparked by the 30th anniversary of the reforms brought in by Margaret Thatcher’s government is tinged with anxiety about whether London can retain its status as one of the world’s biggest financial centres.

The shape of the UK’s trade deal with the remaining 27 members of the EU in the post-Brexit world is the topic of much debate across the City – and other financial hubs around the world. The new buzzword is “passporting”, the means by which members of the EU are able to do business in each other’s countries without impediment.

Last week, France’s ambassador to the UK, Sylvie Bermann, told an audience of London-based bankers that Paris was ready to house the bankers affected by the fallout of the Brexit vote. Frankfurt has sent delegations to London to set out its case for relocation, while Dublin and Luxembourg are also regarded as alternative centres to the UK capital. Anthony Browne, chief executive of the British Bankers’ Association, warned this weekend that bankers’ “hands are quivering over the relocate button”.

It is a far cry from 27 October 1986, when after years of negotiations with the government, the LSE switched on computer screens and shut down its dealing room. “Open outcry”, where traders dealt shares face to face, was scrapped. The big bang also meant the scrapping of fixed commissions on share dealing and of ancient distinctions between stockbrokers, who advised clients, and jobbers, who bought and sold shares on their behalf.

Thatcher’s government regarded the previous set-up as anti-competitive and inefficient and wanted the City to adopt new technology to compete as finance went global.

The effect was to make many small City firms obsolete as the most prestigious were snapped up by US investment banks and rivals from Switzerland, Germany and elsewhere. The City boomed as London became a global financial centre, bridging the time zones of the Americas and Asia and allowing foreign banks access to the EU. This year it has even led to an attempt to merge the London Stock Exchange and Deutsche Börse.

Job numbers rose. In early 1986, financial services employed 976,000 people in Britain, government figures show. By 1990 the number had jumped to 1.18 million and it peaked at 1.21 million in 2008. Today, even after the financial crisis and 30 years of automation and cost cuts, there are 1.15 million people employed in finance – 174,000 more than before the big bang.

Richard Lumb, chief executive of Accenture’s global financial services business, said it also democratised share ownership – and brought in £65bn of tax revenues. This was one of the benefits of the bonus culture that took over the City in the wake of the big bang.

“Brexit will change the City in some ways,” said Lumb. “But I’m more optimistic than pessmistic.” He pointed to factors such as the skilled workforce in London and the tax and legal environment.

The lobby group The City UK has calculated that “hard Brexit” – in which the UK does not have access to the single market of the remaining 27 EU countries – could put 35,000 jobs at risk.

Boardman, though, sees some positives from leaving the EU – for instance, freeing the City from a tax on financial transactions that is being introduced in 10 European countries or the cap on bonuses that has forced up City salaries. “On the other hand, if financial passporting is lost that would be adverse … If you already have offices in the EU it may be you can more easily manage the loss of the passport … but if you don’t it could be more difficult.”

Previous anniversaries of the big bang have also coincided with controversies. In 2011, the 25-year milestone was marked by soul searching about the impact that the implosion of the banking sector had had on the economy and inequality.

But, Boardman said, the current controversy about financial services post-Brexit is about more than just London. “The future of the City is an extremely important thing for the country and I don’t think we should talk about it as the future of the City. It’s the future of the country to a very significant extent because the whole country benefits from the City’s activities.”

https://www.theguardian.com/business/2016/oct/23/anniversary-of-big-bang-on-the-lse-tinged-with-post-brexit-anxiety

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