SBHD: The authors of a report on the City are fooling both themselves and investors if they think London really is a thriving financial centre. By George Pitcher
I am holding an interesting report, published on Monday, that shows the British typewriter industry is still preeminent in global terms.
The survey, conducted by the British Typewriter Manufacturers Association (BTMA) and sponsored by the Typography Research Unit (UK), demonstrates that global advances in word processing technology have not adversely affected Britain’s competitive position in mechan-ical and electric typewriters.
Indeed, the typewriter industry may have been enhanced by such advances. The research project chairman Stan Qwerty says: “The Americans and the Japanese can produce fancy keyboards and software, but we still lead the world with the carbon ribbon typewriter – largely because we are the only country still making them.”
None of this is true, of course. But it might as well be. Two days ago, a report called The Competitive Position of London’s Financial Services was published. It is the result of a three-year “independent” study led by the London Business School and funded by the Corporation of London, which sounds like a metropolis-wide organisation, but which is actually the local authority covering the square mile that is the discredited City.
The report cost £1.5m – more than many privatised utility chiefs earn. But this is small beer compared with the sums the City has lost recently on behalf of savers, pensioners and charities.
What is really remarkable is the sheer complacency, arrogance and disregard for what has been happening in and to the City of London that this report’s authors display.
Or perhaps it is not so remarkable. For it was the very complacency, arrogance and disregard for reality beyond the City’s walls that has landed it in the pickle that this report so resolutely disregards.
The jury is not so much still out on Barings as yet to be appointed. But, even ignoring that fiasco, where have the report’s authors been for the past decade? From the smug smiles they delivered from the steps of the Guildhall for Monday’s national newspapers, they might as well have been running bookshops in Hay-on-Wye.
We need not, perhaps, dwell unduly on Professor Richard Brealey of the the London Business School and Michael Cassidy of the Corporation of London. But Stanilas Yassukovich, chairman of the City Research Project (CRP – they wisely left the third word “Administration” out) was joint deputy chairman of the Stock Exchange from Big Bang until 1989, and is an ex-chairman of the Securities Association. He is described as one of the City’s most respected investment bankers (Merrill Lynch and so on).
Where were he and his CRP colleagues when the Bank of England failed to recognise the signs that led to the collapse of BCCI? Where were they when Robert Maxwell outwitted the City’s self-regulatory system to leave thousands of pensioners facing ruin?
Where were they when the pensions salesmen were selling portable pensions that now have to be unwound? Where were they when the City’s advisers picked up huge utility privatisation fees under the pretence of spreading share ownership to investors who have yet to see the promised high street share shops?
Where are they now that self-regulation has been widely recognised as a sham which serves only the interests of its members instead of those to whom it retails its services?
Well, recently they have been producing their report. Its conclusions are laughable. The City’s standing as a pre-eminent international financial centre is, apparently, not in danger from the likes of Frankfurt, which is perceived to have a worse quality of life. Tell that to investors in BCCI, Barlow Clowes, Barings and Maxwell’s pension funds.
The “serious threat” to the regulatory process apparently comes from the potential shift in decision-making to the European Union. Yes, heaven forbid that a bunch of bureaucrats should take over responsibility for financial regulation from our ever-vigilant bunch of, er, bureaucrats.
Professor Brealey tells us the research offers little support for the notion that the City suffers from over-costly regulation. He compares our own investment management, life assurance and personal finance sectors with those of the US and France and concludes that, in securities, the UK’s regulatory costs amount to half the operating expenses of the US. The report also states that the City’s international activities have been growing strongly over the past ten years.
The US, of course, has the Securities & Exchange Commission, while we have the Stock Ex-change, the Bank of England – and Barings.
The report rates the City’s support services very highly, citing an “unusual concentration” of leading law firms. Well, we need them, don’t we?
As for telecommunications, Britain is blessed with “probably the most liberal regulatory regime in the world”. No, the City has the most liberal regulatory regime in the world, as its customers have learned to their cost. What the telecoms industry has is a privatised supplier barred from developing all the services it could because of its former monopoly status, and a major rival (Cable & Wireless) that is developing the multi-national business market.
Yet the report says advanced telecoms is one of the factors that leads the authors to question the notion of “competing cities”. It hasn’t apparently occurred to them that it is this technology which will enable foreign firms to maintain a presence in London without having to be here.
And what does CRP identify as the City’s major weakness? Well, public transport is a problem. The survey suggests a levy on City firms to improve the transport infrastructure.
Breathtaking, isn’t it? Were these people brand managers of a product that had just wiped out its investors, they would be out on their ears if this was their R&D response.
But this is the City, not industry, and so they are not out on their ears, but off on a junket to sell this evidence of City prosperity in New York and Tokyo.
I wrote here a fortnight ago, about the Barings crisis, that “if the City remains aloof, then we are entitled to ask what other management disciplines it is failing to apply”.
CRP provides a substantial answer to that question. Please, bring off the clowns.
George Pitcher is joint managing director of media consultancy Luther Pendragon.