UK Starting Business

Here in the book W.A. Thomas also sets about giving a full account of the Big Bang covering the main changes as well as their effects on the market.

He begins by describing the conditions preceding the Big Bang when in 1983 it was thought that the changes would serve to instil competition between member firms, with its effects confined largely to the exchange. It was also thought that changes in member firm structure would be inevitable, with firms merging and several disappearing in the competitive battle.

However, it is apparent that much more was in store. The realisation that competitive conditions would require considerable injections of capital provided opportunities for large financial institutions to acquire a foothold in the security industry, which soon mushroomed to dozens of offers of alliances to member firms.

At the end of this process, financial institutions saw the prospect of being able to offer security business as part of their general financial services. When it became apparent in 1983 that a 29.9% ‘trade investment’ in member firms could be turned in the near future into a full subsidiary, the search for suitable partners began in earnest. The structure of the industry was destined to be recast.

They needed additional capital to meet the new competitive conditions, undertake market making, and for the attempt to rival the activities of the international securities houses - but generally large sums of capital only come with the surrender of control.

This basic need for capital on the part of the member firms coincided with drive among many financial institutions to diversify their activities by adding security dealing and broking.

The choices were to buy a big broker and/or a jobber, buy a medium-sized firm and build on it, or decide to go it alone and build up gradually. Few seemed to have the patience for the latter route.

By the end of 1984 virtually all the top brokers had formed alliances with various institutions, and all the leading jobbers were similarly linked. Over 70 alliances had been formed by May 1986.

While domestic financial institutions were well in the fore, it was also evident that a number of overseas interests had been equally active, all eager to participate in the opportunity to secure a presence in a major international market.

Thomas W.A. (1986) The Big Bang, Philip Allan Publishers, Oxford.