TODAY is the twenty-fifth anniversary of Black Monday, when stock markets around the world spectacularly crashed and the FTSE 100 plunged from over 2,300 to depths of near 1,500. Although 1987 is long ago, and we’ve reasonably moved on to consider more recent financial disasters, Britain’s return to confidence then holds lessons for politicians and business leaders today.
Those working in the City – and the public more broadly – have always remained resilient and have fought through crises with optimism and hope. And finance has consistently been the backbone of subsequent recovery. Although we talk about the need to reorientate our economy, finance’s invisible earnings have always been disproportionate to other sectors.
However, we may have underestimated the angst caused by the more recent demise of the banking sector. This is somewhat understandable. Of the millions employed directly or indirectly in financial services, only a few were responsible for the events of 2007 and 2008. None of us wants to take responsibility for events that were outside our control.
But this angst does need to be dealt with and confidence must be restored to and in the financial system if Britain is to return to growth. The problem, however, is a lack of resolve on the part of those in positions of political power. Politicians are regarded with a level of disdain unheard of in the late 1980s, and are doing nothing to educate the public in the painful changes Britain now needs to undergo.
A decade ago, government profligacy and an overindulgence of credit by consumers nearly pushed the world over the precipice and into the abyss. Consequently there is a price to pay. But people don’t like taking their medicine. Governments are also not good at administering it, or articulating the reasons why the medicine is necessary. Leadership is essential. Now it is sorely lacking.
Some understand how critical leadership is. But more UK politicians should take one leaf out of David Cameron’s book. When he travels abroad, he sells UK Plc with gusto, drive, verve and a smile. He is upbeat. If we can bring back confidence, recovery will surely follow. While inertia will drive this country beyond recession and into depression.
But make no mistake, London still aspires to be the financial capital of the world, despite New York having taken hold of the bid in terms of implementing banking regulation and the Dodd-Frank recommendations more quickly than its peers in the EU and the UK.
Financial and insurance services contributed £125.4bn in gross value added to the UK economy in 2011. The public must learn to live with the financial sector if it wants to see a strong recovery. London is the centre of the time zone, English is the international financial language of the world, and London is better equipped to drive recovery than any other financial centre.
We recovered from Black Monday; we can recover from this latest crisis.
David Buik is spokesperson for Cantor Index.