Who's going to blink first? It won't be Sky that's for a href=mailto:sure
Who's going to blink first? It won't be Sky, that's for sure.j.warner independent.co.uk. Just in case you hadn't noticed, today is the 15th anniversary of Big Bang, an event that changed the face of the City for ever On one level, it was an innocuous enough event. By today's standards, the existence of a system that required all stock brokers to charge a minimum rate of commission, forbade brokers from making a market in shares, and stopped outsiders from owning a stock market firm, was absurd, and even at the time it seemed hard to defend. Even so, few would have predicted the seismic shift in ownership, power and culture that dismantling this system would bring about. Over the intervening years the City has changed beyond recognition from a closed shop of exclusively British-owned securities firms and merchant banks into an international financial centre which is almost entirely controlled by the bulge bracket firms of Wall Street and their European counterparts. Whether Margaret Thatcher and her then Trade and Industry Secretary, Cecil Parkinson, would so wholeheartedly have backed the reforms had they realised they would give rise to such a root and branch structural shift is anyone's guess. But what is not in doubt is that by the mid-1980s, the City was slipping into the sea and without modernisation, the place would almost certainly have been doomed.
To her eternal credit, Mrs Thatcher was always as hostile to the closed shops of big business and wealth as to those of organised labour. The City had become an inward looking, uncompetitive, class-ridden oligopoly and yes, in its culture of long lunches, and its toleration of sloppy and untoward practice, both unprofessional and out of date. The process of capital market reform that began with the dismantling of exchange controls ended with deregulation of the Square Mile. Without these reforms, the City would not today be describing itself as the world's most pre-eminent international financial centre. That position would instead have belonged to Frankfurt, Paris or somewhere else Not everything about the old City was bad.
As Philip Augur has remarked in his excellent book on this period of the City's history, The Death of Gentlemanly Capitalism, there was much to admire in its culture of honour, decency and service. But the Stock Exchange's refusal up until Big Bang to contemplate change of any sort left the partnerships that then ruled the roost totally unprepared for the onslaught that was about to hit them. Of the major stock broking and jobbing partnerships that then existed, only one is still around in its original form, Cazenove The same goes for the merchant banks All but NM Rothschild and Lazards have sold out. A myriad of once glorious, old City names is now largely lost in the mists of time This didn't happen all at once. There were two distinct phases to the transformation of the City that subsequently took place. In the first, there was a mad scramble among the big commercial banks, both British and foreign, to buy up the best of the Stock Exchange partnerships and City merchant banks and mould them into something akin to an integrated, American-style investment bank covering all aspects of securities trading, corporate advice and capital raising. Very few of them understood what they were doing and most of them lost their shirts Some £500m was spent in the first wave of acquisitions.
Another £500m was lost in the subsequent downturn, and then hundreds of millions more written off in the programme of closures and withdrawal that followed. In the second phase, there was a more structured assault by the big investment banks of Wall Street and some of their European counterparts, much of it a green field attempt to build a presence from scratch. The Americans brought in their own people, their own systems, their own methods and their own salaries. Rather than buy existing franchises, they poached the most able and up and coming talent around, often on salary and bonus packages with which the old City couldn't even begin to compete, and then applied it more effectively. What subsequently happened was a massacre, and like all massacres, it was unfair and arbitrary. The bulge bracket firms of Wall Street have their own cartel and hugely lucrative it is too.