Barclays did not signal a complete exit from investment banking yesterday, but there are implications. The requirement to use capital more efficiently, regulatory changes, and pressure from shareholders all work against investment banking. Looking around the UK sector, arguably only HSBC is committed to retaining its presence. It’s possible that this will simply hand the initiative to the US giants, whose sheer size may prove decisive. Global investment banking may return as a real force in the future – but that will be too late for UK participants, not having stood by the business during hard times. Richard Hunter is head of equities at Hargreaves Lansdown.
UK investment banking is not in terminal decline. First, Barclays’s decision to cut jobs is specific to Barclays – it has struggled to hit its return on equity targets for years. I would worry more if other investment banks were also rapidly shrinking their UK arms, but I haven’t seen any evidence of that. Second, even if Barclays’s decision does signal a broader decline in UK investment banking, this decline is almost certainly temporary. One lesson from the past is that the financial sector always rebounds after crises, even if it takes many years. The good old days will come again. Stefan Lewellen is assistant professor of finance at London Business School.