As part of the process of a Guild Apprentice becoming a Guildman, each is required to write an essay on an aspect of the City of London or of the Guild which may be of interest to members. Below is that from Apprentice Arjun Krishna.

The Growth of Finance in London: A Tale of Two Districts

With its total population projected to exceed 10 million by 2020, thereby officially earning the status of “megacity”, London stands alone in its energy, attractiveness and diversity. The city is “well- proportioned” in every sense of the phrase; a balance of political and socioeconomic power, a blend of tradition and modernity and a key centre for European culture, including sacred music and the arts. London’s primary distinction, however, rests in its reputation as one of the leading global financial centres. As a specialist in exporting financial services, London accounts for over 20% of the UK’s GDP; this success can certainly be attributed to the prominence of two financial & business districts which have displayed contrasting, yet complementary, features: The City of London and Canary Wharf (in the Docklands area). To understand this pairing, we examine the development of each district over the years and highlight the key drivers behind the gradual shift of large financial institutions away from The City and towards the competing ‘bubble’ that is Canary Wharf.

The City of London, known simply as “The City”, exists as an enclave, a confined space of approximately 1 square mile on the much larger metropolis of Greater London, that boasts a long and varied history. By far the oldest part of the great city, it formed the basis of trading ports established by the Roman Empire as early as AD 47. As the goods trade thrived, so did The City. When the Anglo-Saxons invaded Britain in the 5th Century, they restored most of the important structures and built their own relatively simplistic, secular dwellings. The Middle Ages, on the other hand, saw a period of frantic expansion and the founding of the City Livery Companies, of which there are currently 110 in existence. Each livery company represented a craft, or trade, and those working in the same craft tended to group together to self-regulate and maintain the high standards usually expected from them. A common means of induction into a livery company was through servitude, in which an indentured apprentice would learn and master the trade of a given livery company before becoming a freeman of The City. Heading into the 19th Century Victorian Era, London transformed into a major hub for banking and commerce. This transformation was highlighted through the founding of three major buildings and institutions that, to this day, represent the cornerstones of modern international financial systems; they are the Royal Exchange (1565), the Bank of England (1694) and the London Stock Exchange (LSE – 1801). All are located within 5 minutes’ walk of each other in the Bank area – the former two sit opposite each other on Threadneedle Street while the latter can be found in Paternoster Square. The LSE continues to be the global leader in trading in foreign exchange, Eurobonds and global insurance and the City houses more than 500 bank offices of varying sizes.

Despite its history of success, The City has not gone by without its fair share of setbacks. The first of these came in the form of the Great Fire of London, a menacingly large conflagration that engulfed the square mile for four full days in September 1666. The fire broke out in a bakery shop on Pudding Lane in the early hours of the morning of 2nd September, and the resulting sparks showered and ignited surrounding buildings. The flames were assisted by a powerful east wind, riding on the momentum until it the wind dropped, by which point over 320 acres of land, including 13,200 houses, 86 parish churches and St Paul’s Cathedral, had been completely destroyed. In the aftermath of this crisis, leading British architects such as Sir Christopher Wren realised that the landscape and structure of The City needed to be redefined to prevent future disasters; previously narrow, cobbled streets were widened to form main roads and the number of newer stone structures increased in the rebuilding efforts. In 1940, The City was targeted by World War II

German air forces in the Blitz and again suffered substantial damages. My experience as an Apprentice to the Guild of Mercers’ Scholars has been particularly informative; one of my most memorable Guild visits was the City Walk in July 2015, where I had the opportunity to familiarise myself with all major constructions and landmarks in the square mile and to see, with my own eyes, the different structures that survived the Blitz and the Fire, whilst appreciating these clusters with varying, periodically typical designs. Our tour began at Guildhall, home to the City of London Corporation and the only fully intact secular stone building dating before the Great Fire. I learnt that the Fire and the Blitz played major roles in influences new City building regulations, with the latest process developments unveiled in 2010. Height restrictions were placed on new schemes to preserve the City’s skyline. The central issue facing modern banks and other financial institutions today is the lack of affordable space in the clustered City. An overwhelming majority of tower blocks are multi-tenanted and offer little opportunity for expansion either upwards or outwards. The cost of new city office space in 2012 was estimated to be £55-60 per square foot, and is likely to increase further. Following the widespread impacts of the 2008 Global Financial Crisis, there has been a surge in “red tape” measures in the banking sector, and several credit-constrained firms have been transferring operations out of The City into a more appropriate location in order to reduce costs.

Canary Wharf’s beginnings were altogether rather indifferent. The project emerged from the derelict London Docklands area, by the West India Docks to the East of The City. The closure of the shipping industry in the 1960s freed up land for construction on both sides of the docks. Low demand for the space kept land prices to a minimum until the London Docklands Development Corporation (LDDC) began their regeneration project. The first extended tower blocks were completed in 1981 and the concept for the modern-day Canary Wharf was born when Michael von Clemm, former Chairman of Credit Suisse First Boston, decided to take over and convert the whole area into a cluster of front-to-back offices, inspiring the creation of a new business district. 1 Canada Square became the UK’s tallest building at the time of its completion in 1991 and a symbol of the urban regeneration of the Docklands. It was around this time that The City started to view Canary Wharf as an existential threat and began to construct tightly-packed office spaces near stations in the Bank and Blackfriars areas, and the latter faced several roadblocks in its development projects.

After the Olympia & York handlers filed for bankruptcy, an international consortium purchased the area in 1995 and rebranded it as the Canary Wharf Group. This second push coincided with a boom in the UK property market through the late 1990s into the early 2000s, as flexible office spaces started attracting several banking corporations to the area. Lower area costs of £36 per square foot and wider trading floors were the main drivers of this shift as several headquarters moved into the East London district. Peter Rees, planning officer for The City of London, admitted that London needed Canary Wharf during the turn of the century in order to accommodate the rapid expansion of the financial services sector, though The City itself continues to retain several banks, boutique firms and most major legal practices. Canary Wharf’s “coming of age” was recently confirmed when a 2012 article in the Financial Times stated that the area employed around 44,500 bankers compared to The City’s 43,000. In spite of this recent shift, several workers have branded Canary Wharf’s working environment “sterile”; City life is still held in a higher regard, not least due to the proximity to major cultural and leisure landmarks and environmental factors. Large institutions and exchanges such as the LSE remain firmly rooted to the spot, as the area remains a powerful business magnet for alternative advisory services and for the technology space. Among the major European

cities, London is in a unique position of having 2 such important financial centres, further cementing its standing on an international scale.

Though there is scope for both The City and Canary Wharf to expand over the next five years, this growth is likely to be plagued by uncertainty. Technological progress and construction are subject to diminishing returns, so the number of new workers employed in the financial services industry is likely to grow marginally and the spoils should be shared evenly across the two districts. In light of last year’s European Union Referendum result, the extent of influx of high-skilled foreign labour and capital will depend largely on banks’ passporting rights into the EU bloc from The City. Some of the larger institutions in Canary Wharf have already scaled back a portion of their operations, reducing their cost base and need for physical office space whilst opening opportunities for rent-sharing with smaller firms in the industry. However, there is still every reason to be optimistic about future economic prospects; over the years, London has shown a remarkable willingness to adapt to the situation at hand and can thus draw on talent from other developed and emerging economies, whilst reinstating stable English City laws. The alternative field of financial technology, or “fintech”, is rapidly emerging as an alternative to traditional banking services, and this is an area where The City, with its vast array of start-ups, holds a distinct competitive advantage over rival international centres. Canary Wharf continues to dominate its peers too, according to the latest Global Financial Centres Index rankings. With their fates firmly intertwined, this is not so much a battle between The City and Canary Wharf as a harmonic, co-existence of equals with complementary strengths.

Bibliography:

https://www.cityoflondon.gov.uk/things-to-do/visit-the-city/our-history/Pages/city-history.aspx

Livery Company Records –

http://broadcast.lds.org/elearning/FHD/Community/en/Community/Denise_Mortorff/LIVERY_COM PANY_RECORDS_Presentation_Handout.pdf

Canary Wharf claims high ground on City – https://www.ft.com/content/f280f2bc-9cf3-11e1-9327- 00144feabdc0

Facing up to catastrophe: The Great Fire of London

(https://www.history.ox.ac.uk/sites/default/files/history/documents/media/archer_the_great_fire_ of_london.pdf)

Canary Wharf Group – http://group.canarywharf.com/ http://canarywharf.com/mainFrm1.asp?strSelectedArea=History

The West India Docks: buildings, warehouses – http://www.british-history.ac.uk/survey- london/vols43-4/pp284-300

The City of London faces up to the future – https://www.ft.com/content/0eba4f78-76b1-11e6-bf48- b372cdb1043a

 

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