Hostname: page-component-cd9895bd7-hc48f Total loading time: 0 Render date: 2024-12-23T06:12:14.309Z Has data issue: false hasContentIssue false
  • English
  • Français

Big Bang in the City of London: an intentional revolution or an accident?

Published online by Cambridge University Press:  23 June 2014

Christopher Bellringer  and
Ranald Michie
Christopher Bellringer*
Affiliation:
University of Durham
Ranald Michie*
Affiliation:
University of Durham
*
Christopher Bellringer, BA History Durham University, GDL Student at BPP Law School, London.
Corresponding author: Ranald Michie, Department of History, Durham University, 43 North Bailey, Durham, DH1 3EX, UK, [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

In July 1983 an agreement was reached between the British government and the London Stock Exchange that was to transform the London securities market in October 1986. The result was a revolution that extended all the way from the design of the market to those permitted access to the governance of those who traded. Given the speed of change, it was termed ‘Big Bang’ by contemporaries. As the scale of the transformation became known, politicians were quick to claim credit for what had been achieved. Subsequently, Big Bang has been regarded as one of the crowning achievements of the Conservative government led by Mrs Thatcher, providing the foundation for the City of London's re-emergence as the leading international financial centre. However, only now is evidence emerging of the intentions of those involved at the time rather than as expressed in the light of hindsight, which casts doubt on what they were seeking to achieve, whether viewed from the perspective of either the politicians or those in charge of the Stock Exchange. Instead, the longer-term pressure for change in the London securities market, the chain reaction caused by abolition of fixed-commission charges, and the proactive role of the Bank of England appear to be of greater significance. What an examination of the process leading up to Big Bang in 1986 reveals is the complexity of political decision involving the financial sector and the danger of unforeseen consequences. One small change can create a tipping point if the result is to remove an essential element within a complex system.

Keywords

British governmentCity of LondonCity–government relationsLondon Stock ExchangeThatcherism

JEL classification

N24: Europe: 1913– N2: Financial Markets and Institutions N4: Government, War, Law, International Relations, and Regulation N44: Europe: 1913–
Type
Articles
Information
Financial History Review , Volume 21 , Issue 2 , August 2014 , pp. 111 - 137
Copyright
Copyright © European Association for Banking and Financial History e.V. 2014 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Primary sources

Bank of England Archives, Exchange Controls (EC5/652)Google Scholar
Bank of England Archives, Stock Exchange reference (6A385/12–6A385/14)Google Scholar
Churchill Archives Centre, Churchill College, Cambridge, the Papers of Baroness Thatcher (THCR)Google Scholar
Churchill Archives Centre, the Papers of Sir John Nott (NOTT)Google Scholar
National Archives, Prime Minister's Private Office Papers (PREM 19/436, PREM 19/437)Google Scholar
National Archives, Treasury Overseas Finance Sector, Finance Economic Unit Files (T388/155, T388/196, T388/201-T388/208)Google Scholar
National Archives, Department of Trade and Industry and successors: Fair Trading Division: Registered Files (FV73/145-FV73/148)Google Scholar
Bank of England, Material related to selected Restrictive Practices Court actions and Financial Services reform (1979–86). www.bankofengland.co.uk/publications/Pages/foi/disc070629.aspxGoogle Scholar
Bank of England Quarterly Bulletin, 25, December 1985Google Scholar
Financial Times Historical ArchiveGoogle Scholar
Howe, G. (1994). Conflict of Loyalty. London: Methuen.Google Scholar
Howe, G., Joseph, K., Prior, J. and Howell, D. (1977). The Right Approach to the Economy: Outline of an Economic Strategy for the Next Conservative Government. London: Conservative Central Office. www.margaretthatcher.org/document/BD6C9A0D56FC493BBF5E447BA9DFBF4B.pdfGoogle Scholar
Lawson, N. (1988). The State of the Market: With a Commentary by Alan Budd. London: Institute of Economic Affairs.Google Scholar
Lawson, N. (1992). The View from No. 11: Memoirs of a Tory Radical. London: Bantam Press.Google Scholar
Nott, J. (2002). Here Today Gone Tomorrow: Recollections of an Errant Politician. London: Politico's Publishing.Google Scholar
Parkinson, C. (1992). Right at the Centre: An Autobiography. London: Weidenfeld & Nicolson.Google Scholar
The Telegraph Online ArchiveGoogle Scholar
Lawson, N. (2013). Interview on financial reform. Interviewed by Christopher Bellringer [in person] House of Lords, London, 9 January 2013.Google Scholar
Bank of England Archives, Exchange Controls (EC5/652)Google Scholar
Bank of England Archives, Stock Exchange reference (6A385/12–6A385/14)Google Scholar
Churchill Archives Centre, Churchill College, Cambridge, the Papers of Baroness Thatcher (THCR)Google Scholar
Churchill Archives Centre, the Papers of Sir John Nott (NOTT)Google Scholar
National Archives, Prime Minister's Private Office Papers (PREM 19/436, PREM 19/437)Google Scholar
National Archives, Treasury Overseas Finance Sector, Finance Economic Unit Files (T388/155, T388/196, T388/201-T388/208)Google Scholar
National Archives, Department of Trade and Industry and successors: Fair Trading Division: Registered Files (FV73/145-FV73/148)Google Scholar
Bank of England, Material related to selected Restrictive Practices Court actions and Financial Services reform (1979–86). www.bankofengland.co.uk/publications/Pages/foi/disc070629.aspxGoogle Scholar
Bank of England Quarterly Bulletin, 25, December 1985Google Scholar
Financial Times Historical ArchiveGoogle Scholar
Howe, G. (1994). Conflict of Loyalty. London: Methuen.Google Scholar
Howe, G., Joseph, K., Prior, J. and Howell, D. (1977). The Right Approach to the Economy: Outline of an Economic Strategy for the Next Conservative Government. London: Conservative Central Office. www.margaretthatcher.org/document/BD6C9A0D56FC493BBF5E447BA9DFBF4B.pdfGoogle Scholar
Lawson, N. (1988). The State of the Market: With a Commentary by Alan Budd. London: Institute of Economic Affairs.Google Scholar
Lawson, N. (1992). The View from No. 11: Memoirs of a Tory Radical. London: Bantam Press.Google Scholar
Nott, J. (2002). Here Today Gone Tomorrow: Recollections of an Errant Politician. London: Politico's Publishing.Google Scholar
Parkinson, C. (1992). Right at the Centre: An Autobiography. London: Weidenfeld & Nicolson.Google Scholar
The Telegraph Online ArchiveGoogle Scholar
Lawson, N. (2013). Interview on financial reform. Interviewed by Christopher Bellringer [in person] House of Lords, London, 9 January 2013.Google Scholar

References

Augar, P. (2001). The Death of Gentlemanly Capitalism: The Rise and Fall of London's Investment Banks. London: Penguin.Google Scholar
Augar, P. (2009). Chasing Alpha: How Reckless Growth and Unchecked Ambition Ruined the City's Golden Decade. London: Bodley Head.Google Scholar
Bevir, M. (2011). Public administration as story telling. Public Administration, 89, pp. 183–95.Google Scholar
Bevir, M. and Rhodes, R. A. W. (1998). Narratives of ‘Thatcherism’. West European Politics, 21, pp. 97–119.Google Scholar
Broadberry, S. N. (1997). The Productivity Race: British Manufacturing in International Perspective, 1850–1990. Cambridge: Cambridge University Press.Google Scholar
Broadberry, S. N. (2006). Market Services and the Productivity Race, 1850–2000: British Performance in International Perspective. Cambridge: Cambridge University Press.Google Scholar
Budd, L. and Whimster, S. (1992). Global Finance and Urban Living: A Study of Metropolitan Change. London: Routledge.Google Scholar
Cairncross, A. (1988). Bank of England: relationships with the government, the civil service and parliament. In Toniolo, G. (ed.), Central Banks' Independence in Historical Perspective. Berlin: de Gruyter.Google Scholar
Cairncross, A. (ed.) (1989). The Robert Hall Diaries. London: Routledge.Google Scholar
Capie, F. (2010). The Bank of England, 1950s–1979. Cambridge: Cambridge University Press.Google Scholar
Cassis, Y. (2006). Capitals of Capital: A History of International Financial Centres, 1780–2005. Cambridge: Cambridge University Press.Google Scholar
Chernow, R. (1991). House of Morgan: An American Banking Dynasty and the Rise of Modern Finance. New York: Grove Press.Google Scholar
Coakley, J. and Harris, L. (1992). Financial globalisation and deregulation. In Michie, J. (ed.), The Economic Legacy, 1979–1992. London: Academic Press.Google Scholar
Cobbett, D. (1986). Before the Big Bang: Tales of the Old Stock Exchange. Portsmouth: Milestone.Google Scholar
Collins, M. and Baker, M. (1999). Bank of England autonomy: a retrospective. In Holtfrerich, C.-L., Reis, J. and Toniolo, G. (eds.), The Emergence of Modern Central Banking from 1918 to the Present. Aldershot: Ashgate.Google Scholar
Crafts, N. (2011). British relative economic decline revisited. University of Warwick Working Paper Series, 42 May.Google Scholar
Daunton, M. (2002). Just Taxes: The Politics of Taxation in Britain, 1914–1979. Cambridge: Cambridge University Press.Google Scholar
Deane, M. and Pringle, R. (1994). The Central Banks. London: Hamish Hamilton.Google Scholar
Dowd, K. and Lewis, M. (1992). Deregulation and monetary policy. In Dowd, K. and Lewis, M. (eds.), Current Issues in Financial and Monetary Economics. London: Palgrave Macmillan.Google Scholar
Dunleavy, P. (1995). Policy disasters: explaining the UK's record. Public Policy and Administration, 10, pp. 52–70.Google Scholar
Evans, E. (1997). Thatcher and Thatcherism. London: Routledge.Google Scholar
Ferguson, N. (2010). High Financier: The Lives and Time of Siegmund Warburg. London: Penguin.Google Scholar
Fishman, J. (1993). The Transformation of Threadneedle Street: The Deregulation and Re-regulation of Britain's Financial Services. Durham, NC: Carolina Academic Press.Google Scholar
Francis, J. (1993). The Politics of Regulation: A Comparative Perspective. Cambridge, MA: Wiley-Blackwell.Google Scholar
Fry, G. (2008). The Politics of the Thatcher Revolution: An Interpretation of British Politics, 1979–1990. London: Palgrave Macmillan.Google Scholar
Gamble, A. (1981). Britain in Decline: Economic Policy, Political Strategy and the British State. London: Macmillan.Google Scholar
Gladwell, M. (2000). The Tipping Point: How Little Things Can Make a Big Difference. New York: Little Brown.Google Scholar
Goodhart, C. (1987). Structural changes in the British capital markets. In Goodhart, C., Currie, D. and Llewellyn, D. (eds.), The Operation and Regulation of Financial Markets. Basingstoke: Palgrave Macmillan.CrossRefGoogle Scholar
Goodhart, C. (2000). Economics of ‘Big Bang’. In Michie, R. C. (ed.), The Development of London as a Financial Centre. London: Taurus.Google Scholar
Goodhart, C. A. E. (2003). The constitutional position of the central bank. In Friedman, M. and Goodhart, C. A. E. (eds.), Money, Inflation and the Constitutional Position of the Central Bank. London: Institute of Economic Affairs.Google Scholar
Green, E. (2004). The conservatives and the City. In Michie, R. C. and Williamson, P. A. (eds.), The British Government and the City of London in the Twentieth Century. Cambridge: Cambridge University Press.Google Scholar
Hamilton, A. (1986). The Financial Revolution: The Big Bang Worldwide. Harmondsworth: Penguin.Google Scholar
Healey, N. (1992). The Thatcher supply-side ‘miracle’: myth or reality? The American Economist, 36, pp. 7–12.Google Scholar
Hood, C. and Margetts, H. (2007). The Tools of Government in the Digital Age. London: Palgrave Macmillan.Google Scholar
Ingham, G. (1984). Capitalism Divided? The City and Industry in British Development. London: Macmillan.Google Scholar
Institutional Investor (1988). The Way It Was: An Oral History of Finance, 1967–1987. New York: William Morrow.Google Scholar
Jackson, B. (2010). At the origins of neo-liberalism: the free economy and the strong state, 1930–1947. The Historical Journal, 53 (1), pp. 139, 142, 151.Google Scholar
Johnson, C. (1991). The Economy under Mrs Thatcher, 1979–1990. Harmondsworth: Penguin.Google Scholar
Kandiah, M. (1999). Witness seminar 1 ‘Big Bang’: the October 1986 stock market deregulation. Contemporary British History, 13, pp. 100–32.Google Scholar
Kerr, I. (1986). Big Bang. London: Euromoney Institutional Investor PLC.Google Scholar
Kitson, M. (1999). Recession and economic revival in Britain: role of policy in the 1930s and 1980s. Contemporary European History, 8, pp. 1–27.CrossRefGoogle Scholar
Konzelmann, S., Fovargue-Davies, M. and Schnyder, G. (2012). The faces of liberal capitalism: Anglo-Saxon banking systems in crisis? Cambridge Journal of Economics, 36, pp. 495–524.Google Scholar
Kynaston, D. (1991). Cazenove & Co.: A History. London: Batsford.Google Scholar
Kynaston, D. (1997). LIFFE: A Market and Its Makers. London: Granta.Google Scholar
Kynaston, D. (2000). The long life and slow death of exchange controls. Journal of International Financial Markets, 2, pp. 37–42.Google Scholar
Kynaston, D. (2002). The City of London, vol. 4: A Club No More, 1945–2000. London: Pimlico.Google Scholar
Kynaston, D. (2011). Was the Big Bang good for the City of London and Britain? The Telegraph, 26 Oct.Google Scholar
Laurence, H. (2001). Money Rules: The New Politics of Finance in Britain and Japan. Ithaca, NY: Cornell University Press.Google Scholar
Letwin, S. (1992). The Anatomy of Thatcherism. London: Fontana.Google Scholar
Longstreth, F. (1979). The City, industry and the state. In Crouch, C. (ed.), State and Economy in Contemporary Capitalism. London: Croom Helm.Google Scholar
Lowe, R. (1997). Plumbing new depths: contemporary historians and the Public Record Office. Twentieth Century British History, 8, pp. 240–53.Google Scholar
Margetts, H. and Hood, C. (eds.) (2012). Paradoxes of Modernization: Unintended Consequences of Public Policy Reform. Oxford: Oxford University Press.Google Scholar
Mcfarlane, C. and Anderson, B. (2011). Thinking with assemblage. Area, 43(2), pp. 162–4.Google Scholar
Michie, R. C. (1992a). The City of London: Continuity and Change since 1850. London: Macmillan.Google Scholar
Michie, R. C. (1992b). The London and New York Stock Exchanges, 1850–1914. London: Allen and Unwin.Google Scholar
Michie, R. C. (1997). Friend or foe? Information technology and the London Stock Exchange since 1700. Journal of Historical Geography, 23, pp. 315–22.Google Scholar
Michie, R. C. (1998). The invisible stabiliser: asset arbitrage and the international monetary system since 1700. Financial History Review, 15, pp. 5–26.Google Scholar
Michie, R. C. (1999). The London Stock Exchange: A History. Oxford: Oxford University Press.Google Scholar
Michie, R. C. (2004). The City of London and the British government: the changing relationship. In Michie, R. C. and Williamson, P. A. (eds.), The British Government and the City of London in the Twentieth Century. Cambridge: Cambridge University Press.Google Scholar
Michie, R. C. (2005). A financial phoenix: the City of London in the twentieth century. In Cassis, Y. and Bussière, E. (eds.), London and Paris as International Financial Centres. Oxford: Oxford University Press.Google Scholar
Michie, R. C. (2006). The Global Securities Market: A History. Oxford: Oxford University Press.Google Scholar
Michie, R. C. (2010a). Exchanges in historical and global context. In Harris, L. (ed.), Regulated Exchanges: Dynamic Agents of Economic Growth. Oxford: Oxford University Press.Google Scholar
Michie, R. C. (2010b). The London Stock Exchange and the British government in the twentieth century. In Battilossi, S. and Reis, J. (eds.), State and Financial Systems in Europe and the USA: Historical Perspectives on Regulation and Supervision in the Nineteenth and Twentieth Centuries. Farnham: Ashgate.Google Scholar
Michie, R. C. (2011). The battle of the bourses? Competition between stock exchanges in the 20th century. In Quennouelle-Corre, L. and Cassis, Y. (eds.), Financial Centres and International Capital Flows in the Nineteenth and Twentieth Centuries. Oxford: Oxford University Press.Google Scholar
Michie, R. C. and Williamson, P. (eds.) (2004). The British Government and the City of London in the Twentieth Century. Cambridge: Cambridge University Press.Google Scholar
Moran, M. (1981). Finance capital and pressure-group politics in Britain. British Journal of Political Science, 11, pp. 381–404.Google Scholar
Moran, M. (1983). The politics of banking: the strange case of competition and credit control. In King, R. (ed.), Capital and Politics. London: Routledge & Kegan Paul.Google Scholar
Moran, M. (1988). City pressure: the City of London as a pressure group since 1945. Contemporary Record, 2, pp. 29–30.Google Scholar
Moran, M. (1990). The Politics of the Financial Services Revolution: The USA, the UK and Japan. Basingstoke: Palgrave.Google Scholar
Morgan, G. and Sturdy, A. (2000). Beyond Organizational Change: Structure, Discourse and Power in UK Financial Services. London: Palgrave Macmillan.Google Scholar
Newton, S. (2009). The two sterling crises of 1964 and the decision not to devalue. Economic History Review, 62, pp. 73–98.Google Scholar
Newton, S. and Porter, D. (1988). Modernization Frustrated: The Politics of Industrial Decline in Britain since 1900. London: HarperCollins.Google Scholar
O'brien, R. (1992). Global Financial Integration: The End of Geography. London: Council on Foreign Relations Press.Google Scholar
Osborne, D. and Gaebler, T. (1992). Reinventing Government: How the Entrepreneurial Spirit Is Transforming the Public Sector. Reading, MA: Addison-Wesley.Google Scholar
Overbeek, H. (1990). Global Capitalism and National Decline: The Thatcher Decade in Perspective. London: Unwin Hyman.Google Scholar
Parker, D. (1993). Privatisation ten years on: a critical analysis of its rationale and results. In Healey, N. (ed.), Britain's Economic Miracle: Myth or Reality? London: Routledge.Google Scholar
Peden, G. C. (2000). The Treasury and British Public Policy, 1906–1959. Oxford: Oxford University Press.Google Scholar
Peden, G. (2004). Treasury and the City. In Michie, R. C. and Williamson, P. A. (eds.), The British Government and the City of London in the Twentieth Century. Cambridge: Cambridge University Press.Google Scholar
Plender, J. and Wallace, P. (1985). The Square Mile: A Guide to the New City of London. London: Century.Google Scholar
Poser, N. (1991). International Securities Regulation: London's ‘Big Bang’ and the European Securities Markets. Boston: Little, Brown and Company.Google Scholar
Posner, E. (2009). The Origins of Europe's New Stock Markets. Cambridge, MA: Harvard University Press.Google Scholar
Reid, M. (1988). All-Change in the City: The Revolution in Britain's Financial Sector. Basingstoke: Macmillan.Google Scholar
Reid, M. (1989). Mrs Thatcher's impact on the City. Contemporary Record, 2(6), pp. 20–22.Google Scholar
Rhodes, R. (1997). Understanding Governance: Policy Networks, Governance, Reflexivity and Accountability. Buckingham: Open University Press.Google Scholar
Roberts, R. (2000). Setting the City free: impact of UK abolition of exchange controls. Journal of International Financial Markets, 2, pp. 131–7.Google Scholar
Roberts, R. and Kynaston, D. (1995). The Bank of England: Money, Power and Influence, 1694–1994. Oxford: Oxford University Press.Google Scholar
Roberts, R. and Kynaston, D. (2001). City State: A Contemporary History of the City of London and How Money Triumphed. London: Profile.Google Scholar
Robins, P. (1993). Government policy, taxation and supply-side economics. In Healey, N. (ed.), Britain's Economic Miracle: Myth or Reality? London: Routledge.Google Scholar
Schaefer, S. (1990). The regulation of banks and securities firms. European Economic Review, 34, pp. 587–97.Google Scholar
Singleton, J. (2010). Central Banking in the Twentieth Century. Cambridge: Cambridge University Press.Google Scholar
Swary, I. and Topf, B. (1992). Global Financial Deregulation: Commercial Banking at the Crossroads. London: Blackwell.Google Scholar
Talani, L. S. (2012). Globalization, Hegemony and the Future of the City of London. London: Palgrave Macmillan.Google Scholar
Thomas, W. (1989). The Securities Market. New York: Philip Allan.Google Scholar
Thompson, P. (1997). The pyrrhic victory of gentlemanly capitalism: the financial elite of the City of London, 1945–1990. Journal of Contemporary History, 32, pp. 283–304.Google Scholar
Tomlinson, J. (2007). Tale of a death exaggerated: how Keynesian policies survived the 1970s. Contemporary British History, 21, pp. 437, 442.Google Scholar
Vander weyer, M. (2000). Falling Eagle: The Decline of Barclays Bank. London: Weidenfeld & Nicolson.Google Scholar
Vicarelli, F. (1988). Central bank autonomy: a historical perspective. In Toniolo, G. (ed.), Central Banks' Independence in Historical Perspective. Berlin: de Gruyter.Google Scholar
Vogel, S. (1996). Freer Markets, More Rules: Regulatory Reform in Advanced Industrial Countries. Ithaca, NY: Cornell University Press.Google Scholar
Wake, J. (1997). Kleinwort Benson: A History of Two Families in Banking. Oxford: Oxford University Press.Google Scholar
Walters, A. (1986). Britain's Economic Renaissance: Margaret Thatcher's Reforms, 1979–1984. Oxford: Oxford University Press.Google Scholar
Wilks, S. (1999). In the Public Interest: Competition Policy and the Monopolies and Mergers Commission. Manchester: Manchester University Press.Google Scholar
Woycik, D. (2011). The Global Stock Market: Issuers, Investors and Intermediaries in an Uneven World. Oxford: Oxford University Press.Google Scholar