In the 1980s, an agreement between the London Stock Exchange and the Thatcher government marked the beginning of a financial revolution in the City of London, shaping it into the financial powerhouse that we know today.
The impacts of the so-called ‘Big Bang’ agreement were colossal. In one fell swoop, numerous significant changes to the structure of financial markets transformed the city from a 20th century capital into a global centre of expertise and a magnet for international banks.
Today, in the wake of Brexit, the City’s story continues to capture the imagination of those who believe it will retain its leading role as a key financial centre in the decades to come. Chief among those believers – outwardly, at least – is the chancellor Rishi Sunak, who is already forecasting the next ‘Big Bang’ for the City of London.
It comes after mounting criticism of the new trade deal’s lack of provisions for the UK financial industry sector on the grounds that it grants only limited access to EU markets. The detail of any agreement has been put off until another day, to be dealt with in separate discussions, with a preliminary deadline in March 2021.
Even if the outcome gives UK-based firms fuller access to the EU market, their position is precarious as the EU’s equivalence regulations can be withdrawn at a month’s notice. This uncertainty could advance exodus of key players from the City which began in 2016 and saw banking giants such as JPMorgan and Goldman Sachs shift significant amount of assets from London to the EU.
We must also factor-in the effects of the current pandemic, and the long-term implications of increased home working for places like Canary Wharf, which a year ago had 100,000 people busying themselves in its many shiny towers – and up to 40,000 additional daily visitors – but is a ghost town currently, with around five per cent of that number working there today.
If and when London explodes in a Big Bang 2.0, it will be up against decades of EU efforts to boost its own financial centres, some of which will undoubtedly challenge the City’s future role as the continent’s financial capital.
