London’s Place in the World of Finance: A Supply-side Approach

If its prospects were doubted in the early 1990s, London is now the preeminent international financial centre. It dominates its European rivals, and is joined with New York in a non-stop reciprocal global embrace. Whereas some analysts approach this topic concentrating on the nature and quality of market relationships in London and between London and the rest of the world, others emphasise the role that government regulation has played in promoting the growth of the City of London with respect to its European rivals. Here, I elaborate the logic whereby financial products and services are produced at a particular point in space (given geographically dispersed demand). In doing so, my supply-side model emphasises the competitive dynamics of the financial services industry, the distinctive qualities of financial products, and the peculiar place of London in corporate global transactions systems. I mean to show that the production of financial products has been brought to ground (so to speak) in London for a variety of (perhaps non-replicable) reasons. In this regard, my argument is clearly at odds with those analysts of information and communication technology who proclaim the end of geography; I contend that history and geography are important when accounting for the place of London in the world of finance. However, my argument also sits uncomfortably with those who insist upon the persistence and co-existence of different national financial systems. My argument has significant implications for the role of London in the evolving integrated European market for financial services, and for the future of continental European financial centres. Acknowledgements. This paper was made possible by the support of AIG Financial Products Corp., a grant from the Future Governance programme of the UK Economic and Social Research Council, and a 4th Framework programme grant from the European Union. Respectively, I would like to thank Joe Cassano and Robert Hirst, Edward Page and Adam Tickell, and William Lazonick and Mary O'Sullivan for their personal and financial support. I would also like to thank Duncan McKenzie (IFSL) for his help in identifying relevant data, Nigel Thrift (Bristol) for his sense of time, and Simon Ford and Giles Keating of CSFB for their shared insights. I should acknowledge Linda Atkinson’s bibliographic skills and Jane Battersby’s editorial help. Jan Burke processed and reprocessed the manuscript. None of the above should be held responsible for any errors or omissions.