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End of an Era: London's Merchant Banks Fade
15 Feb
Summary
- Schroders' sale marks a significant shift in London's financial landscape.
- Historically, Continental families built London's financial services industry.
- UK businesses are increasingly undervalued and sold to foreign buyers.
The sale of Schroders, an asset manager with over two centuries of history, prompts reflection on London's financial heritage. Founded in 1804 by Johann Heinrich Schroder, it was part of a tradition of merchant banks established by Continental European families that significantly shaped the UK's financial sector.
Historically, these firms, including names like Barings and Rothschilds, were instrumental in developing London into a global financial hub, second only to New York. The article notes that most are no longer independent, with only Rothschild remaining so, and that the UK's financial services industry is now heavily dominated by US firms.
The "Big Bang" reforms of 1986, which deregulated the City of London and removed restrictions like foreign ownership bans, led to increased US control in investment banking. While this boosted London's status as a financial centre, it also meant key decisions are often made in New York.
This trend of foreign acquisition is highlighted by Schroders' sale, with the article questioning why so many UK businesses are undervalued. It calls for fostering a new generation of entrepreneurs who can build lasting enterprises, emphasizing the need for scalable funding within the UK to rival that available in the US.
