The Future Of Industry In The City Of London

Remarks to: National Liberal Club – Livery Dinner, Monday, 24 May 2021, London by Alderman & Sheriff Professor Michael

Chairman, Fellow Aldermen, Fellow Liverymen, Ladies & Gentlemen.

The Real Time Club, a group of computer geeks I once had the privilege of chairing, has met at the NLC regularly since 1967.  I may have spoken at this venue many times, but I have never had the honour of addressing NLC members.

Alderman Tim McNally asked me to speak on the future of industry in the City of London, so I am doubly pleased to begin by addressing livery members of the Club who start with a solid grounding of the City.

Politicians in the City of London are not affiliated with political parties, but intellectually it’s hard not to be liberal.  We admire liberal philosophers, Locke, or Nozick under whom I studied.  Tonight the enormous presence of Gladstone, and so many other people who strived to shape society for the better have sat here, drank here, and even smoked here, though now out on the terrace.

I strive, rarely with success, to uphold US poet Robert Frost’s definition of a liberal – “A liberal is a man too broadminded to take his own side in a quarrel.”

Three traditional ethical liberal values are individual rights, freedom of speech, and protection of property.  To those three add three practical liberal values of limited government, free markets, and free trade.  All six values affect industry, but let’s stick to the limited government, free markets, and free trade.

Tim was right to question the City of London’s future.  The City of London is the pre-eminent global commercial centre for professional, business, technical, and financial services.  Not just the Square Mile, it is the world’s ‘Knowledge Mile’.  London is the place businesses come to ‘go global’ by drawing on the world’s most important concentration of innovative knowledge workers.  Over 40 learned societies, 70 universities, and 130 research institutes surround the City.  Our 525,000 workforce has 188,000 finance & insurance workers, but also some 118,000 workers in the professional, scientific & technology sector, and 56,000 in information & communications technology.  We are as much ‘tech’ as ‘finance’.  We continue to add more and more media and creative work too as businesses delivering content round the world draw on UK narratives, art, and music in areas like augmented reality and virtual reality. 

The City’s boom in international finance is less than four decades old.  In fact, the City pre-war was as much about high-value manufacturing near the Barbican as finance. Trade connects the City with the real economy.  Trade as a % of GDP has risen globally from 27% in 1970 to 60% in 2019, a 220% rise in all of our lives over the past half century.  Alongside technology and productivity, rising trade powers increasing economic well-being.  The City’s challenge is to grab every new cohort of business that builds on trade.

My son Nikos once asked me to teach him chess.  Exasperated after half an hour of rules, he said, “Daddy, don’t teach me how to play chess; teach me how to win.”  On challenges, we’ve had Brexit.  Estimated job losses range from 7,500 to 25,000, against some worst case estimates of 75,000 at the time of the referendum.  Trading venues are changing, about £1 trillion of assets have left, along with a few headquarters, but things haven’t collapsed.  We’ve had a tragic pandemic, and hopefully we’ll be able to slow this new variant with the Pun-jab.  Yet while the geographic City had a torrid 2020, the southeast of England tech and finance cluster had a boom year.  GDP is down by over 6%.  But GDP is estimated to rise by over 5% this year. To quote a Pink Floyd response to a poor review, “If this is as bad as it gets, we’re in pretty good shape.”

The huge shift to Asia, largely focused on China, shows every sign of continuing at least another three decades as Indonesia, Bangladesh, Pakistan, Central Asia, and India move up the emerging economy ladder.  We need trade with as many nations as possible, while recognising that not all share our values.  Yet keep our integrity and work to advance liberal principles.

We also need to face up to the emerging consensus on net zero carbon emissions by 2050.  29 years to go from 40bn tonnes to none.  We need to eliminate carbon emissions to save the planet, but we need to prevent carbon border adjustments crushing trade.

As a green aside, have you noticed how recycling has improved due to Covid?  Back in 2019 when you met your neighbours at the recycling bin clanking bags of empty wine bottles you nervously said, “Haha, I swear I’m not an alcoholic, I just had a party.”  Today in 2021 you nervously say, “Haha, I swear I didn’t have a party, I’m just an alcoholic.”

Have you noticed how much smarter the City has become due to covid?  Each livery company and ward club outdoes others in a wide range of events – history, architecture, science, crafts, politics, economics, and the environment.  Our City is mentally alive as never before.

Liberal Prime Minister Asquith’s forthright wife Margot had many great quips. She once said, “[The whole Asquith family overvalues brains.] I’m a little tired of brains: they are apt to go to the head.” Well in the new economy brains are everything.  Back in March the government’s Integrated Review of Security, Defence, Development and Foreign Policy back, “Global Britain In A Competitive Age”, wants us to be a global science and technology brainbox for the purposes of national security.

In Suicide of the West, Koch and Smith contend that “The seeds of liberalism’s downfall lie in its success.”  Here’s a time when we need liberalism to be on the rise.

Using our brains, here are three national challenges to practical liberal values:

  • On limited government, government has just appropriated a significant chunk of GDP with little objection.  We are entering a period of freefall as billions here and there seem unable to add up to a real budget.  Doomsayers foresee overindebtedness, stagflation, inter-generational strife, and worse.  Unorthodox economists herald a gilded age of modern monetary theory.  Liberalism needs to enter this debate with clearer views of what government should do, how much it should do, where it should do it, and how to fund it.
  • On free markets, recent moves by the government and Australia to recognise the simplicity and power of tariff-free and quota-free trade agreements might augur a new age comparable to that liberated by repeal of the corn laws.  If freeports are such a good idea, then should we consider making the entire UK a freeport?  If employee share schemes are such a great idea, why do we restrict them at all?
  • On free trade, we need to establish firmer principles of how to trade with nations of variable values while keeping our integrity. Who pays for resilience and robustness?  We’ve been on an efficiency kick for at least a quarter of a century that has led to brittle supply chains, and brittle credit systems.  How can we structure resilience in long-term finance, perhaps looking to existing London examples, such as the public-private insurer Pool Re fixing long-term market failures over terrorism risk from 1992.

And what about the City?  The City can especially help the UK see through the challenges of appropriate decentralisation.  As the world’s oldest continuous democracy, we need to reaffirm to the nation the positive power of local people in control of their destiny and resources, beacons of light on Cornhill and Ludgate Hill.

Borrowing a political swipe from Gladstone, “The principle of Liberalism is trust in the people, qualified by prudence” – as engraved on the statue on the left as you exit this evening.  We need to trust more in local people.

Dan Quayle once said, “The future will be better tomorrow.”  For my part I would like people to stop talking about things ‘returning to normal’.  I want people to talk about a ‘better normal’.  It was coming before covid.  Business travel in Scandinavia for example dropped 8% in 2019 due to flygskam, flight-shaming. The better normal might be increased international business travel to the City for longer, intense periods, while commuters at the same time commute less.  Our urban environment should support visiting dealmakers, increase their quantity of personal interactions, stimulate them intellectually, and provide more flexible, open, and interactive spaces to make knowledge connections.  We should aspire to be the World’s Coffeehouse, the global meeting place for ventures.

There are many things we can do differently and better.  We are not slaves on an economic journey, we are on an economic journey to help us live better, better education, health, environment, security, and quality of life.

I want to thank all livery companies, for your dedication to philanthropy, your support for education & skills, and ability to integrate people into the City of London community; you are essential to our City’s reinvention.  Livery companies keep the City of London going, and will help the City of London recover, rebuild, and reinvent. 

I often say pessimism is for better times, but too much futurology is full of apocalyptic disasters, when most of human history over the past five centuries is a story of progress. Another Liberal, Macaulay, said, “On what principle is it that with nothing but improvement behind us, we are to expect nothing but deterioration before us?”

The City is about continuity and change, conducting our rituals while seeking to renew our relevance.  We’ve been here before; we’ll build back better again. 

It has been a great pleasure to join you tonight.  Thank you for letting me contribute these remarks.

  • Margot Asquith, wife of liberal Prime Minister (1908-1916) H.H. Asquith quoted in The Economist, 5 October 2002, page 102, review of The Asquiths, Colin Clifford, John Murray Press.
  • “Christianity. Optimism. Science. Growth. Liberalism. Individualism.” KOCH, Richard and SMITH, Chris, Suicide of the West, Continuum (2006), page 195.