Britain: Citadel of the Commonwealth

There was little in the look of the place last week to suggest that it had been through its most traumatic experience since World War II. Wedged between the Bloody Tower and Temple Bar, the one square mile of London known as the City is not only the financial center of Britain and the Commonwealth but a whole way of life— and that life has endured amid countless crises for more than 500 years. In the narrow streets with the wonderful names—Threadneedle, Cornhill, Cheapside, Poultry, Old Jewry—the rush-hour crowds of sober-suited, bowler-hatted men and chattering typists hurried on their way as usual, emerging from tube stations, buses and chauffeured limousines into the gloom of London’s winter day. Brokers lunched rapidly on beer and sandwiches at the mahogany bars of fine old pubs, and the stockjobbers in their silk top hats strode through the streets like characters out of Galsworthy.

Nonetheless, the City had been shaken. It lives and feeds on sterling—and sterling had just had one of the closest squeaks in its history. Just how close it had been was summed up by a top City banker: “The pound was hardly 24 hours from devaluation.” Everyone agreed that what had been put at grave risk was nothing less than the survival of London’s City as a center of international finance. No wonder the hand that held the sherry glass trembled just a little.

The Old Lady. Devaluation, the most dreaded word in the City, was headed off by the $3 billion line of international credit that steadied the sagging pound. The danger was by no means over—Britain announced that its reserves had melted in November to a seven-year low of $2.3 billion—but at least the pound was growing stronger (see THE WORLD). Whether it continues to do so will depend in part upon the resilient men of London’s City. Operating the world’s most concentrated and versatile counting-house and the mightiest citadel of money east of Wall Street, they provide Britain with as much as $500 million a year in “invisible” earnings from overseas.

The City’s brokers handle 80% of the world’s gold marketing, 65% of its ship chartering and by far the largest amount of its international insurance coverage. To the City’s major commodity markets, traders from all over the globe come to buy and sell grain, metals, tea, textiles, rubber, wool, peanuts, buttons and hides. Packed into the area of narrow, convoluted streets and lanes, some of which still cannot take wheeled traffic, are also most of Britain’s investment brokers and the London Stock Exchange, which lists more issues (about 9,500) than any other exchange in the world.

Even more important are the City’s banks, which thrive where various forms of banking operations have been conducted since the Middle Ages. Behind forbidding stone walls broods “the Old Lady of Threadneedle Street”—the Bank of England—which controls the currency that finances 40% of all international trade. Clustered near by, interspersed with some 30 churches built by Christopher Wren, are 150 banking houses with such famous names as Barclays, Midland and Lloyds. British banks have for generations made the whole world their oyster, have extensive and direct knowledge of business conditions and customers overseas. Altogether, they have sprouted 500 branches in foreign lands, five times as many as U.S. banks have overseas.

Jargon & Tradition. Many of today’s City leaders descend from the merchant bankers who bankrolled Britain’s colonial expansion and cleared whole continents in the days when sterling was supreme. The most influential among them is the scion of a 200-year-old banking family: George R. S. Baring, 46, third Earl of Cromer, who, as the outspoken and energetic Governor of the Bank of England, was the chief British architect of last fortnight’s $3 billion rescue of the pound. At the top of the private banks are scores of modern-day Rothschilds, Schroders, Brandts, Hambros and other heirs to ancient City fortunes. Despite this strong affection for family and school ties, the City is increasingly looking outward for talent to maintain its standing as what Bank Chairman Jack Hambro calls “one hell of a financial mechanism.” In the stock-brokerage firms, in fact, a surprising number of the top partners started out as clerks and now occupy posts that pay $11,000 to $45,000 a year.

Once they have reached this level, traders and bankers become part of an in-group with trust in money and in one another. Mysterious to outsiders, including most Britons, the City is cozy and village-like from the inside, speaks its own jargon, and carefully keeps its business confidential. Deals amounting to millions of pounds are often closed with a casual word, but it is a tenet of the City that business is never discussed in such prestige clubs as White’s, Pratt’s, Carlton or Brooks. All major financial institutions have their own dining rooms, where financial men daily have guests for relaxed lunches. In their offices, the leaders of London’s oldest neighborhood conduct their business in a dark-paneled aura of ceremony; there are grandfather clocks, brass cuspidors and stand-up desks about, and the desk lamps of Hambros’ partners were converted from kerosene. The City also has some of the most strictly observed traditions in the kingdom, including a troop of soldiers who arrive each night from Wellington Barracks to guard the Bank of England.

Appalled by Bumbles. Beyond all the tradition and trappings, the City’s brokers and bankers are realistic men who look with clear eyes on what is happening to Britain’s economy. Thanks to the new $3 billion credit, they believe that British business and the government have won a few months’ time to increase productivity and step up exports. Though appalled by the government’s economic bumbles so far, the City’s leaders still show a remarkable amount of support for Harold Wilson’s Labor government. The consensus is that once the new government has settled down it will pay considerable attention to the City’s views.

Labor may be surprised to learn that these tradition-conscious capitalists believe that they are much more modern and competitive than Britain’s highly protected industry. Says Kenneth Keith, chairman of the Philip Hill banking house: “We get protection from nothing, and nobody has any particular sympathy if we go under—and that’s good.” After all, the City rebuilt itself after the great London fire of 1666, which completely destroyed it, and again after World War II, in which it was more thoroughly blitzed than any other part of London. What is even more difficult, it has managed to prosper despite the liquidation of the empire, skyrocketing taxes and several postwar sterling crises. Britain’s new ministers will probably find its advice worth listening to.