Does the UK actually have a financial system of its own?

The financial system of Great Britain is concentrated in the City of London. But is the City of London actually part of Great Britain as any other?

By Lars Schall

The City of London, the economic center of Greater London, was founded around 50 AD after the Romans invaded Britain seven years earlier. In the course of the Norman invasion, the City received its first Royal Charter in 1067, granted by William the Conqueror, giving it special privileges. Around 1189, the City was granted the right to have its own mayor: today’s Lord Mayor of London. (1)

The importance of the City of London’s financial scene can be traced back to the British Empire of yore. “Historically there is a strong interlink between the rise of the City of London and the rise of the British empire“, explains British economist Ronen Palan. “Usually, large financial centres emerged in the world’s large trading centres. In 1850 Britain was the largest manufacturing centre—about 50% of all global manufacturing was produced in the UK—and so, not surprisingly, it was serviced by the largest financial centre. So the City of London was at the core of the British economy and the British empire.“ (2)

London accounts for around a quarter of all economic activity in the UK – with much of this taking place in the financial sector. The largest U.K. banks are still based in the City of London today, so even within Greater London there are “strong and distinctive geographic concentrations of financial services firms and jobs. Of the 210 very large (500 plus employees) UK financial services firms, 90 are based in London, covering 65% of London’s financial services employment. Around 60 of these firms are based in the City of London, and 15 in Canary Wharf (Tower Hamlets).“ Accordingly, banking sector jobs are „largely distributed between the City of London (42%) and Tower Hamlets (31%), while fund management is concentrated in the City of London (46%) and Westminster (40%).“ (3)

The City of London is located on the territory of the Corporation of the City of London, a kind of local council that “exists outside many of the laws and democratic controls which govern the rest of the United Kingdom. … The City has exploited this remarkable position to establish itself as a kind of offshore state.“ (4)

In fact, we find two statements on the City of London website that raise eyebrows: “The City of London developed a unique form of government which led to the system of parliamentary government at local and national level. Its constitution is rooted in the ancient rights and privileges enjoyed by citizens before the Norman Conquest in 1066.“ (5) And: „We have our own government (the oldest in the country with origins pre-dating Parliament), our own Lord Mayor and independent police force.“ (6)

When elections are held in the so called “Square Mile“ – an area about three miles east of Knightsbridge along the Thames – , they take place in an unusual way: the electorate includes not only the approximately 9,000 residents of the City of London, but also multinational companies. (7) The larger the company, the more votes it has. (8) To this day, the City “is the only part of Britain over which parliament has no authority“, so that politician Clement Attlee stated already in 1937:“Over and over again we have seen that there is in this country another power than that which has its seat at Westminster. The City of London, a convenient term for a collection of financial interests, is able to assert itself against the government of the country.“ (9) While Parliament has no powers over the City of London, the City of London conversely has influence over Parliament, as it has its own representative in the House of Commons, the so-called „Remembrancer,“ who safeguards the interests of the City. (10) In addition, the City of London has the power to pursue its own foreign policy. (11) Moreover, the king/queen of England may enter the Square Mile only with the express permission of the Lord Mayor; from a monarchical point of view, sovereignty certainly looks somewhat different.

In this respect, it may be true then what the German economist Richard Werner stated in an interview: “The UK doesn’t have finance; the City of London has, and it is not part of the UK. … The City of London is outside the United Kingdom.” (12)

Sources:

(1) Matt Kennard: Revealed: The City of London’s secret foreign policy shielded from democratic oversight. Declassified UK, October 5, 2021; https://declassifieduk.org/revealed-the-city-of-londons-secret-foreign-policy-shielded-from-democratic-oversight/

(2) The Facts About ‘Britains’s Second Empire’. TruePublica, October 1, 2019; https://truepublica.org.uk/united-kingdom/the-facts-about-britains-second-empire/.

(3) Laura Davidson: UK Financial Services – Clustering and Concentration of Firms and Jobs. City of London Economic Research, April 13, 2017; https://colresearch.typepad.com/colresearch/2017/04/in-this-article-ive-analysed-data-on-the-distribution-and-location-of-uk-firms-and-jobs-in-financial-services-highlighti.html

(4) George Monbiot: The medieval, unaccountable Corporation of London is ripe for protest. The Guardian, October 31. 2011; www.theguardian.com/commentisfree/2011/oct/31/corporation-london-city-medieval. Regarding the Corporation of London, see also William Ferneley Allen: The Corporation of London, Its Rights and Privileges; https://www.wattpad.com/9747-the-corporation-of-london-its-rights-and?p=1, and Nicholas Shaxson: A Tale of Two Londons. Vanity Fair, April 2013; https://www.vanityfair.com/style/society/2013/04/mysterious-residents-one-hyde-park-london.

(5) The City’s Government; https://www.cityoflondon.gov.uk/about-us/law-historic-governance/the-citys-government

(6) Police Authority; https://www.cityoflondon.gov.uk/about-us/about-the-city-of-london-corporation/police-authority

(7) Nicholas Shaxson: A Tale of Two Londons.

(8) George Monbiot: The medieval, unaccountable Corporation of London is ripe for protest.

(9) Matt Kennard: Revealed: The City of London’s secret foreign policy shielded from democratic oversight.

(10) Ibid.

(11) Ibid.

(12) Compare https://twitter.com/LarsSchall/status/1408135237478064128

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