The City of London and its role as a financial centre

companies were spending more than 5% of their annual revenue on R & D compared with only 28% of British companies. As a result Britain has been automating more slowly than her rivals. In fact it may be the consequence of Margaret Thatchers views on public spending which includes medical service, social spending, education and R&D. “The Iron lady” argued that “if our objective is to have a prosperous and expanding economy, we must recognise that high public spending kills growth of industry”, as money is taken from the productive sector (industry) to be transferred to unproductive part of it. As a result in the 80s only 6% of Britains labour had a university degree against 18% in America, 13% in Japan and 10% in Germany. Technical education has always been compared with Britains major competitors. According to government study “ mechanical engineering is low and production engineers are regarded as the Cinderella of the profession”. Very few school leavers received vocational training. Since 1980s among university graduates the tendency has been to go from the civil service to merchant banking, rather than industry. And according to analysts resulted from the long-standing cultural roots. Public school leavers considered themselves “gentlemen” too long to adjust fast to the changes of time. Efforts are now taken by the labour government to boost technical and enterprise skills in schools. The 1999 Pre-budget report outlined a 10 million pounds for the purpose. Despite the favourable effect of “Thatcherism” Britains economic problems in the 1990s seemed to be difficult. Manufacturing was more efficient but Britains balance of payments was unhealthy, imports of manufacturing goods rose by 40%, and British exports could hardly compete with those of its competitors. Car workers in Germany, for instance, could produce a Ford Escort in help the time taken in Britain. In the 90s among the European countries British average annual productivity per worker took the 6th place. The revenue softened the social problems but distracted Britain from investing more into industry. Many analysts thought that much more should have been invested into engineering production, managerial and marketing before the North Sea oil declined. The Labour government undertakes to improve the situation. In his Pre-budget report on 9 November 1999 the Chancellor of the Exchequer Gordon Brown set out new economic ambitions for the next decade. Under them Britain will raise its productivity faster than its competitors to close the productivity gap and a majority of Britains school and college leavers will go on to higher education. In the 80s British companies invested heavily abroad while foreign investments in Britain increased too. Today in a speech in Tokyo on 6 September1999 the Foreign Secretary Robin Cook said that “Britain is a chosen country for more investment from Japan than anywhere else in Europe and more than thousand companies operate in the U. K.” Mr. Cook added that the huge European Market of 370 million people was “the largest single market in the world, a market that is set to expand even further with the arrival of new member states”. In fact he said investment in Britain is the highest bridge into Europe. Britain as a world leader in “high-tech” industries One of the three British microprocessor producers was making 70% of British silicon wafers required for new information technology even in the seventies. On Nov.3.1999 Techmark, a new technology market, was launched at the London Stock Exchange. According to Gordon Brown, Chancellor of the Exchequer, Techmark will be the London Stock Exchange “market within a market” for innovative technological companies. The specialised institutions are agencies created to meet the needs of specific groups of borrowers mostly industrial and commercial - which are not adequately covered by other institutions. They operate in both public and private sectors. In general they offer alternative funding to that provided by banks and building societies. Some of them were set up with Government support and with financial backing from banks and other financial institutions. Some public sector agencies offer financial support to industry in Scotland, Wales, and Northern Ireland. The main private sector institutions are finance houses and leasing companies, factoring companies, finance corporations and Venture Capital Companies. Finance houses are major suppliers of hire-purchase finance for the personal sector of short term credit and leasing to the corporate sector. Leasing companies buy and own equipment required and chosen by businesses and lease it at an agreed rental rate. Factoring companies provide cash for a company in exchange for the sums they owe. A factoring company buys up a clients invoices as they arise and finances up to 80% of the value of the invoices; the rest is paid after a period, after deduction of administration and finance charges. Finance corporations meet the need for medium and long term capital when such funds are not easily or directly available from traditional sources such as the Stock Exchange or banks. Venture Capital Companies offer medium term and long term equity financing for new and developing businesses when such funds are not readily available from banks and other traditional sources. The British Venture Capital Association has 103 full members, which make up over 99% of the industry. Financial markets is a collection of sophisticated securities, futures and options the money market, the euro currency market, Lloyds insurance market, the foreign exchange market and markets in bullion and commodities. The Stock Exchange The origin of the London Stock Exchange goes back to the coffee houses of the seventeenth century where those who wished to invest or raise money bought and sold shares in joint stock companies. Brokers later opened their own subscription Economy of the country has been directed through the City which is the nerve center of the national finance. The greater part of the countrys income comes from invisible exports - operations originating from the City and flowing through its channels. A large proportion of Britains wealth has been invested by the City overseas. A number of banking institutions have their head offices in Britain but operate mainly abroad in particular regions such as Latin America or East Asia through extensive branch networks. The major bank in this sector is Standard Chartered. This shows how the City of London expands its activities beyond the countrys borders; the same goes for the influence of the London Stock Exchange and Commodities Exchanges (particulars of the City of London as a financial center will be dealt with in Chapter three).

Chapter 3. The City of London as a Financial Center, its Main Institutions. There has been a long tradition in Britain of directing the economy through the great financial institutions together known as