London

Twenty years ago this week London experienced a revolution. There were no burning cars or red flags, on the contrary, the upheaval brought about by the ‘Big Bang’ liberalisation of London’s stock exchange – one of the defining moments of the Thatcher era – was a very capitalist affair, played out in the heart of one of the city’s oldest and most secluded industries: financial services. Feature continues

This revolution didn't just shake the City suits of the square mile; it affected the life of every single Londoner. And it still does. As the generator of roughly 13 per cent of London’s GDP, the City is one of the most vital actors in the capital’s economy. Nationally, it accounts for 2.5 per cent of GDP – not bad when you bear in mind that the City employs roughly just 0.5 per cent of the UK population. The some £20 billion the financial services sector contributes to the national purse is roughly equivalent to what the government allocates to the Scottish Executive. As Douglas McWilliams, an economist at the Centre for Economics and Business Research, bluntly puts it: ‘Without the City, everyone in the UK would be worse off.’

Big Bang had the least revolutionary of manifestoes being, in essence, a call for the abolition of fixed minimum stock exchange commissions and the demand to scrap long-standing and seemingly petty demarcation lines governing just who could do what where with someone else’s money. And yet the sweeping changes heralded by Big Bang were as profound as any palace-storming popular uprising. In 1986 the UK exported £2bn of financial services; by 2005 this had risen to £25bn.

In shaking up the ‘gentlemanly capitalist’ world of pin-stripes and fusty traditions, Big Bang was instrumental in transforming the City of London into a truly global modern financial centre, ranking alongside – and in certain cases eclipsing – New York and Tokyo. Trading became a screen-based activity, with deals conducted online rather than face-to-face on the stock exchange floor. But it also changed the face of London: the way the capital looks, the character of its neighbourhoods, and the make-up and diversity of its population.

‘Financial and business services have come to dominate the London economy,’ says Professor Tony Travers from the London School of Economics. ‘City money is extremely visible throughout London and it allows a whole range of other industries and services to develop in the same place.’

Of course the City has always mattered and the importance of the Square Mile as a financial and business centre can be traced back to the Romans. Since the nineteenth century the City has been one of London’s great sources of employment and wealth. But more recently the English language, a long-standing tradition of financial services and trading, common law and a location in a time zone neatly pitched between the US and Asian markets have come together to make it the right place at the right time.

The actual work of the 300,000 to 350,000 or so people estimated as having ‘City-type’ jobs has also become much more varied. Traditional jobs of buying and selling of shares, bonds, commodities, insurance, mergers and acquisitions, the raising and lending of finance for trade and speculative investments continue. But the way and scale in which they are done has changed profoundly.