Mark was asked to join a debate at the Oxford Union in opposition to the Motion, ‘This House Believes the City is a Drain on Talent’. Joining him in opposition were Chris Saul of Slaughter & May, James Uffindell of Bright Network and Robin Geffen of Neptune Investment Management. In proposition were Claire Perry MP, Doug Richard, formerly of Dragon’s Den, and Sahar Hashemi, Founder of Coffee Republic.
Rather longer ago than I care to remember, I went down from Teddy Hall convinced that the UK was a place of infinite possibilities. It was 1987. The previous autumn Prime Minister Margaret Thatcher had introduced the Financial Services Act. It was groundbreaking legislation that took a hammer to the old boys’ club of the City of London, smashing established elites and protected industries.
What became known as the ‘Big Bang’ had an effect on the City, the capital and the wider British economy that was profound. Internationally pre-eminent until the outbreak of the First World War, the City of London was suddenly back in vogue.
By the age of 29, I had set up my first business, got myself professionally qualified – another City lawyer, I am afraid! – sold my business and set up a second enterprise. All here in Britain.
When my researcher left the ‘other place’ in 2005, the City was similarly riding high. The economy may have been showing signs of overheating, the Big Bang liberalisations having been combined with loose monetary policy, lax tripartite regulation and a government addicted to spending. Yet London was nevertheless booming as the financial capital of the world.
As a result, graduates in the mid-Noughties bemoaned the fact that they were unable to get a foot on the housing ladder as prices whizzed into the stratosphere. But there were still jobs – and plenty of them. Roles in financial services, yes. But also jobs in engineering, public services, creative industries, business. The great question facing graduates was not how to find employment but which career path would give the most personal fulfilment…And if fulfilment was not going to be possible, which would pay the most money!
No such luxury for today’s most talented young Britons who graduate in an incredibly tough employment market following 2008’s financial crash.
Now I know what many of you are thinking: ‘If it wasn’t for the City, we wouldn’t be in this mess!’
That is a whole other debate but I ought quickly to address it lest it undermines my case! To blame the bankers for all our current circumstances is a simplistic and superficial analysis. The financial crash was merely the crescendo to a long period of debt accumulation, racked up in response to the West’s declining competitiveness but also to our collective desire to expand the remit of the state. Bankers exploited and expedited that debt accumulation, yes. But it was loose government policy that allowed it.
Putting that aside, both my experience and that of mid-noughties graduates show that when the City has boomed, it has not been sucking talent from other industries like some parasite. Far from it. It has given all talent possibilities, including possibilities beyond finance.
The City is, in fact, the great talent retainer and attractor since it oils the cogs of the wider economy and provides a critical mass of activity that keeps business on UK shores.
Amidst all the fierce debate about the greed of bankers, it is easy to forget what banks actually exist for, what we mean by ‘the City’.
Fundamentally, a bank acts as an intermediary between those who seek capital (expanding businesses, governments wishing to fund services) and those who have surpluses that they wish to enlarge (investors, savers, pension funds). In short, banks circulate money to areas of an economy that require it and provide the sense of security so crucial to confidence.
That is why the banks had to be rescued in 2008, because they are the key lubricant that enables other sectors of the economy work. When those sectors work, the talented thrive.
The City has grown to provide that intermediary role not just for the domestic market, but for the global economy. As a hub for the circulation of money, people want to do business here. When deals are being struck and money lent, people need lawyers and insurers. They require risk analysts, taxation advisers, fund managers, share dealers.
With such a concentration of expertise in a single compact geographical area, companies want to be headquartered here. Those companies need accountants, auditors, management consultants and pension advisers. Not to mention dazzling new buildings requiring innovative architects, engineers and project managers to build.
With legally sound deals, insured trading and access to growth capital, businesses large and small have the confidence to expand. A hub of professionals with money to spend encourages jobs in housing, restaurants, transport, culture, education and domestic services.
And those professionals who leave the City often do so with a chunk of capital that they use to build their own or invest in others’ start-ups.
The finance sector also contributes a hefty amount of tax (some £21bn in PAYE and corporation tax in 2010-11) which governments enjoy spending liberally. That tax is what helps pay for nurses, policemen, teachers. When that flow of money slows, the state must employ fewer people.
So when the City of London went into decline after 2008, there was no great tsunami of talent flooding into engineering, business and the high tech industries. Instead, the economy as a whole was undermined. Our brightest sparks began instead to look beyond the UK entirely for the best opportunities – 10% of British graduates from our top universities are now choosing to work away from the UK.
In spite of the tumultuous past few years, the financial services industry remains one of the only world-beating sectors of which the UK can boast. It is also one of the few sectors which has enormous potential to grow as the burgeoning middle classes of China and India, culturally attuned to invest, expand their savings and pensions.
Just think of the opportunities. In China, the new rural pension scheme has acquired over 240 million people in only two years – that is more than the number covered by America’s entire social security scheme. As the Chinese economy matures, there will surely be an ever greater demand for private pensions and more dynamic investment products.
If the City can grasp that nettle, the UK can retain that unique blend of opportunities that makes the talented want to remain here. If we continue to undermine wealth, bash bankers and scorn success, expect to see talent flow from our nation in double quick time.
I therefore put it to you – the City is no drain on talent. When the City thrives, it acts, in fact, as the UK’s greatest talent retainer.