How did London come to be the world’s greatest financial hub?

The City of London. Image: Getty.

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Ask anyone about powerful stock markets and financial hubs, and the conversation will likely turn to Wall Street. But in actual fact, London has been far more powerful than Wall Street – or any other financial hotspot – for many years. Up until the recent Brexit referendum, which saw Britain vote to leave the European Union, London was king when it came to business, stock trading and financial operations in general.

How did London surpass Wall Street as the world’s finance capital? Partly it was due to favourable legislation, and partly to good positioning. London’s time zone means that its business hours overlap those of the Middle East, America and Asia – something which definitely put the city in good stead when it came to trading.

That said, the key event in London’s rise as the world’s premier financial hub was probably legislation passed the “Big Bang” reforms passed by Margaret Thatcher’s government in 1986. These were intended to remove the laws that were protecting Britain’s slow-growing firms and contributing to sluggish financial markets.

The results were immediate. From a network of small companies with very little potential for growth, London-based businesses grew overnight to become conglomerates of huge proportions, along with more advanced financial practices like virtual banking.

Even better news for UK businesses lay ahead. The Big Bang had created relaxed regulatory measures that allowed corporations to earn unlimited amounts of money between the 1980s and the early 2000s. Helping London further, in 2002, the US Congress tightened corporate regulations through the Sarbanes-Oxley reforms, which increased paperwork and put a cap on the local earning opportunities.

So London’s stock markets flourished: American firms were forced to adhere to the Sarbanes-Oxley reforms, but other international markets simply sidestepped them by taking their business to London instead. It was through these actions that London finally bypassed Wall Street, becoming the world’s number one hotspot for trading and business ventures. Within a few years London had captured more than 75 per cent of the US exchange’s public stock, and Congress was trying to win them back through softer regulation.


The Brexit shockwave

London enjoyed its status as the world’s hub of finance for a few more years, but it was not to last. When the public voted for Brexit, London’s Stock Exchange plummeted, as companies and investors pulled out of Britain and moved their business to other European districts.

Brexit has had a huge impact on businesses in the UK, and a number of European cities that have the potential to replace London as the finance capital of Europe – and perhaps even the world – have stepped forward. Frankfurt, Paris, Madrid and Amsterdam are being touted as candidates, while many experts also theorise that Dublin’s technologically advanced approach may put them in the lead.

However, the glory days might not be over just yet for London. Some commentators have suggested that the British capital will continue to dominate European financial markets for a number of key reasons.

Firstly, the strength of the local courts means that the rule of law will continue to be upheld, including those that protect creditor and shareholders’ rights. Secondly, the UK’s university education offerings in economics and finance are far superior to those anywhere else in Europe. And lastly, the UK’s regulations controlling tax and employment is designed specifically to boost the financial industry’s overall health and profit margins.

There is no denying that trade has become more challenging in London since Brexit. Tax loopholes have been closed, and companies are expected to shell out more of their profits in the process. However, if London manages to keep its dominance over European financial markets, it stands to reason that the city may one day reclaim its title of the world’s greatest finance hub.

 
 
 
 

The IPPC report on the melting ice caps makes for terrifying reading

A Greeland iceberg, 2007. Image: Getty.

Earlier this year, the Intergovernmental Panel on Climate Change (IPCC) – the UN body responsible for communicating the science of climate breakdown – released its long-awaited Special Report on the Ocean and Cryosphere in a Changing Climate.

Based on almost 7,000 peer-reviewed research articles, the report is a cutting-edge crash course in how human-caused climate breakdown is changing our ice and oceans and what it means for humanity and the living planet. In a nutshell, the news isn’t good.

Cryosphere in decline

Most of us rarely come into contact with the cryosphere, but it is a critical part of our climate system. The term refers to the frozen parts of our planet – the great ice sheets of Greenland and Antarctica, the icebergs that break off and drift in the oceans, the glaciers on our high mountain ranges, our winter snow, the ice on lakes and the polar oceans, and the frozen ground in much of the Arctic landscape called permafrost.

The cryosphere is shrinking. Snow cover is reducing, glaciers and ice sheets are melting and permafrost is thawing. We’ve known this for most of my 25-year career, but the report highlights that melting is accelerating, with potentially disastrous consequences for humanity and marine and high mountain ecosystems.

At the moment, we’re on track to lose more than half of all the permafrost by the end of the century. Thousands of roads and buildings sit on this frozen soil – and their foundations are slowly transitioning to mud. Permafrost also stores almost twice the amount of carbon as is present in the atmosphere. While increased plant growth may be able to offset some of the release of carbon from newly thawed soils, much will be released to the atmosphere, significantly accelerating the pace of global heating.

Sea ice is declining rapidly, and an ice-free Arctic ocean will become a regular summer occurrence as things stand. Indigenous peoples who live in the Arctic are already having to change how they hunt and travel, and some coastal communities are already planning for relocation. Populations of seals, walruses, polar bears, whales and other mammals and sea birds who depend on the ice may crash if sea ice is regularly absent. And as water in its bright-white solid form is much more effective at reflecting heat from the sun, its rapid loss is also accelerating global heating.

Glaciers are also melting. If emissions continue on their current trajectory, smaller glaciers will shrink by more than 80 per cent by the end of the century. This retreat will place increasing strain on the hundreds of millions of people globally who rely on glaciers for water, agriculture, and power. Dangerous landslides, avalanches, rockfalls and floods will become increasingly normal in mountain areas.


Rising oceans, rising problems

All this melting ice means that sea levels are rising. While seas rose globally by around 15cm during the 20th century, they’re now rising more than twice as fast –- and this rate is accelerating.

Thanks to research from myself and others, we now better understand how Antarctica and Greenland’s ice sheets interact with the oceans. As a result, the latest report has upgraded its long-term estimates for how much sea level is expected to rise. Uncertainties still remain, but we’re headed for a rise of between 60 and 110cm by 2100.

Of course, sea level isn’t static. Intense rainfall and cyclones – themselves exacerbated by climate breakdown – can cause water to surge metres above the normal level. The IPCC’s report is very clear: these extreme storm surges we used to expect once per century will now be expected every year by mid-century. In addition to rapidly curbing emissions, we must invest millions to protect at-risk coastal and low-lying areas from flooding and loss of life.

Ocean ecosystems

Up to now, the ocean has taken up more than 90 per cent of the excess heat in the global climate system. Warming to date has already reduced the mixing between water layers and, as a consequence, has reduced the supply of oxygen and nutrients for marine life. By 2100 the ocean will take up five to seven times more heat than it has done in the past 50 years if we don’t change our emissions trajectory. Marine heatwaves are also projected to be more intense, last longer and occur 50 times more often. To top it off, the ocean is becoming more acidic as it continues to absorb a proportion of the carbon dioxide we emit.

Collectively, these pressures place marine life across the globe under unprecedented threat. Some species may move to new waters, but others less able to adapt will decline or even die out. This could cause major problems for communities that depend on local seafood. As it stands, coral reefs – beautiful ecosystems that support thousands of species – will be nearly totally wiped out by the end of the century.

Between the lines

While the document makes some striking statements, it is actually relatively conservative with its conclusions – perhaps because it had to be approved by the 195 nations that ratify the IPCC’s reports. Right now, I would expect that sea level rise and ice melt will occur faster than the report predicts. Ten years ago, I might have said the opposite. But the latest science is painting an increasingly grave picture for the future of our oceans and cryosphere – particularly if we carry on with “business as usual”.

The difference between 1.5°C and 2°C of heating is especially important for the icy poles, which warm much faster than the global average. At 1.5°C of warming, the probability of an ice-free September in the Arctic ocean is one in 100. But at 2°C, we’d expect to see this happening about one-third of the time. Rising sea levels, ocean warming and acidification, melting glaciers, and permafrost also will also happen faster – and with it, the risks to humanity and the living planet increase. It’s up to us and the leaders we choose to stem the rising tide of climate and ecological breakdown.

Mark Brandon, Professor of Polar Oceanography, The Open University.

This article is republished from The Conversation under a Creative Commons license. Read the original article.