Thatcher Praised by London Financiers for Reviving City FortunesKevin Crowley, Nandini Sukumar and Jesse Westbrook
London’s financiers paid tribute to former Prime Minister Margaret Thatcher, who died yesterday, as the woman who helped guide the city’s transformation from a provincial trading hub to the world’s top financial center.
Thatcher died after suffering a stroke at the age of 87, almost 30 years after the so-called Big Bang deregulated London’s financial markets, attracted capital and talent, and started a 25-year boom in securities trading.
“She believed in markets, not in governments,” said Crispin Odey, whose London-based hedge fund, Odey Asset Management LLP, oversees $8.5 billion. “She was brave. She stuck to her line.”
Inspired by a free-market philosophy, Thatcher opened up financial markets, sold state-owned industries and cut taxes, helping to revive both the city and fuel the country’s thirst for profit. Today, London is rated the world’s top financial center by Z/Yen Group Ltd. Even so, the unemployment her policies triggered in parts of the U.K. and the disparities in wealth created by the boom of the 1980s remain divisive.
“London became more internationally competitive and from that change sprang London’s place as the center of the world financial markets,” said Terry Smith, chief executive officer of London-based interdealer broker Tullett Prebon Plc. “She moved us nearer to the American enterprise culture in which someone making money through their own efforts was something to emulate -- not something to envy.”
“She brought back a share-owning democracy, a property-owning democracy and gave people individual aspirations,” said Brian Winterflood, founder of market-maker Winterflood Securities Ltd. “But she also created a “loads-a-money” culture,” referring to the quick riches reaped in the City, as the main financial district is known, during the 1980s.
While that culture was successful in boosting London as a finance hub, the lack of oversight may have contributed to the financial crisis and later banking scandals to hit the city, said Robert Hiscox, who was chairman of Hiscox Ltd., a Lloyd’s of London insurer, for 40 years.
“I like the ability to make money,” Hiscox said. “But I do think human beings do need strong discipline: people did unleash the tiger a bit too much.”
Her biggest contribution was cutting income tax to 60 percent from 83 percent, he said. Her government later reduced the rate to 40 percent.
“She gave the country a tremendous work ethic,” he said. “The ability to make money made people work very hard.”
After contracting in 1980 and 1981, the U.K. economy expanded every year under Thatcher, with annual growth peaking at 5.6 percent in 1988. In 1991, the year after her own Conservative party deposed her as leader, the economy shrank 1.8 percent, according to the Office for National Statistics.
“She came after a period when everything was absolutely dreadful,” said Peter Levene, a former Chairman of Lloyd’s of London and Lord Mayor of the city who worked for Thatcher as permanent secretary for defense procurement during the 1980s. “The whole country was regarded as a joke. She changed the whole perception of the country both internally and externally.”
While the regulation of the financial markets brought fresh capital into London from Europe and the U.S. and spurred growth, her changes were still painful. As she removed subsidies for industries such as coal mining, unemployment grew to 11.9 percent in 1984 from 5.3 percent when she took charge in 1979.
By contrast, London’s finance industry boomed, and after the 1991 recession continued to grow until the financial crisis of 2008. Since 1992, the number of people employed in the capital’s finance services industry has increased 63 percent to 200,000 while the contribution of financial services to gross domestic product has increased to 9 percent in 2010 from 6.5 percent, according to TheCityUK, a lobbying group. The industry today accounts for 12 percent of tax receipts, more than any other industry.
“People have this idea she was an evil, wicked woman who put people out of work,” Hiscox said. “All she did was make natural market forces work and control the unions who were strangling the economy.”