The Great Game: Clustering In Wholesale Financial Services

Dr Malcolm Cooper's paper “The Great Game: Clustering in Wholesale Financial Services” offers a unique perspective into the development, growth and sustainability of global financial centres in the post-crisis world. It explains why London and New York became so dominant, why they have been able to maintain their positions and the very real threats they now face.

Some key findings of the paper are:

• The information technology infrastructure is critical to the success of financial services, who are amongst the largest and most sophisticated users of IT systems, but it is a “hygiene issue” not a source of competitive advantage.
• Face-to-face communication is – and will remain – a key factor. For financial clusters to succeed they must have excellent transport infrastructure internally but also with other financial centres.
• People are the most important factor and centres need to be able to attract the top talent. This is not just about remuneration, though financial services companies will continue to pay handsomely for the best people, but also the built environment and social factors such as culture and education.

Dr Cooper's analysis of today's financial centres is rooted in his understanding not only of their historical emergence geographically, and politically, for instance, in London, from the City coffee shops of the 17th century; but also in certain behavioural traits of financial services professionals, who he likens to those of the Swiss pike men who dominated Western European battlefields in the 15th and 16th centuries (both being groups of professionals with highly sought after skills whose rarity allowed them to command premium rates).

Launching the paper at a round table discussion at Gresham College Professor Michael Mainelli, Director of Z/Yen Group, said: “Malcolm reminds us that an industry which makes money from volatility only thrives in conditions of stability, particularly political, regulatory and tax certainty. For policy makers in aspiring financial centres, the gauntlet that Malcolm throws down is to create a stable regime while growing. For policy makers in leading financial centres, Malcolm points out that financial clusters are theirs to lose. The challenge is larger for the aspiring, but in today's climate a few leading centres seem to have policy makers who want to lose. For both, Malcolm's paper should be required reading.”