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29 November 2023

Has the sun set on the City of London?

By Martin Hickman



Is the dominance of the City of London coming to an end? The historic centre of London has long been the headquarters of British finance, the home of classical buildings that accommodate the bankers, traders, accountants, lawyers and regulators who direct money around the arteries of global capitalism.

The grand institutions of the money markets – the London Stock Exchange, the Bank of England and Lloyds of London – are still located in the Square Mile, within the medieval limits of the capital, the long-disappeared London Wall.

But as time goes by, more financial institutions are moving out of the City; westwards to Mayfair and St James’s for the hedge funds, the investment boutiques and the powerful private equity funds; and eastwards for the gigantic US investment banks that have colonised the skyscrapers of Canary Wharf in the once decaying Docklands.

A small but telling sign of this shift has emerged this week in the decision of Credit Suisse, Switzerland’s second largest bank, which is based in Canary Wharf, to consider closing its remaining office in the City, in Tower 42 (the old NatWest Tower), and open a new one in the West End, closer to its “client base” – the hedge funds that control billions of pounds of funds from Georgian houses north of Oxford Street, and the private equity brigade massing in Berkeley Square.

Some senior bankers are now muttering that the City is no longer the place that it once was, that the “buzz” which surrounded it is reverberating less each year.

Finance has “burst its banks” in the City, according to one experienced commentator. The money men are fanning out across London, taking their extravagant salaries into new areas and encouraging a secondary trade in expensive watches, jewellery, bespoke tailoring and fine dining.

The authors of the Michelin Guide, for instance, say Mayfair enjoys the finest restaurants in the country because they enjoy proximity to the expense accounts of the “hedgies”, the professorial elite whose complex financial instruments (or “bets”) make money in rising and falling markets.

The City, it seems, has become a victim of its own success. When Margaret Thatcher unleashed the Big Bang – introducing automated dealing and sounding the death knell for the “buy, buy” trading floors – in 1986, the Square Mile was home to hundreds of small, historic banks and thousands of stockbrokers with names such as Barings and Cazenove.

Emboldened by the break-up of the old gentlemen’s club, foreign banking giants swallowed up their small British counterparts and turned the City into a high finance variant of Wimbledon, a lucrative world-class arena with very few British players.

As a result of light-touch regulation, tax breaks and its fortunate position as a geographical and chronological bridge between Asia and the United States, London has become the richest city in Europe, and vies with New York for the title of the world’s financial hub.

With its administrative function and remaining firms, the City still employs 350,000 people. But Canary Wharf has experienced explosive growth to hit 80,000 employees and the West End now has more than 10,000 – including some very high earners.

David Charters, who worked at Warburgs and Deutsche Bank from 1988 to 2000 and who is now a partner at the boutique finance house Partner Capital in Berkeley Square, says that moving out of the City, not into it, is now a sign that you have arrived.

One of the reasons finance professionals prefer to make the West End their home is that the City has become too congested, making commuting unattractive, says Charters, the author of City novels such as At Bonus Time: No One Can Hear You Scream.

“Jumping into a cab to the West End is so much more agreeable. When you get out at lunchtime for a sandwich you can look around an art gallery or an antique shop.” Thanks to the new technology, the “talent is now mobile”, he says.
Ten facts about the city of London

1. The City of London – also referred to as the Square Mile because it is exactly one square mile (2.5 sq km) in area – is a small city within Greater London and is the UK’s second smallest city after St David’s in Wales

2. It is the world’s leading international financial and business centre and has a resident population of less than 10,000 and employs 350,000 professional workers

3. The City is ruled by its own local authority, the City of London Corporation, which is headed by the Lord Mayor of London. Among its responsibilities, this body is responsible for policing the area in co-operation with the City of London Police

4. The Square Mile was originally contained by a defensive wall known as London Wall, which was built by the Romans to protect their strategic port city. The wall no longer exists – although several sections can be found above ground including a part that was found in 1940 during the blitz

5. The area has been ruled separately since 886, when Alfred the Great appointed his son-in-law as the Governor of London. Alfred wanted to provide a suitable location for merchants coming in from Europe to stay and trade. The City later developed its own laws for the mercantile classes developing such autonomy that many regarded it as a separate Kingdom

6. The city’s boundary remained intact until 1993 when it expanded to the west, north and east. The changes were made to tidy up the perimeter as urban change had developed over many parts of it. The city gave up pockets of land in exchange for the expansion but overall made a land net gain

7. The City has nearly burned to the ground twice, first in 1212 and again in the Great Fire of London in 1666

8. The Square Mile contributes about 2.5 per cent of the UK’s gross national product

9. The financial area’s status has made it a target for political violence. The Provisional IRA exploded several bombs in the City in the early 1990s, including the 1993 Bishopsgate bombing

10. Today, the City houses the London Stock Exchange, Lloyd’s of London and the Bank of England. Canary Wharf, in the once decaying Docklands, began development in the 1980s as an alternative financial centre for London and now features the Financial Services Authority, as well as leading financial institutions such as Barclays Bank, Bank of America, Citigroup and HSBC