OLD school City of London types can be a mine of information.
At a dinner a while ago, I sat next to a sixtysomething veteran of the financial services industry, who had spent four decades working in and around the City and who has held various senior roles at international banks.
I asked him to describe the biggest change he had seen in his career. He thought for a while, placed his knife and fork together at the centre of his plate and began his story.
When he started his career in the 1960s, the City was an old boys’ network. If you went to the right school you could land a good job.
It was a bit elitist, of course, but in those days reputation was everything.
There were institutions with solid, upstanding reputations that you did business with and there were institutions with bad reputations that you knew to avoid. It all boiled down to trust.
Then everything changed. In came waves and waves of regulations and out went the trust.
Our City grandee continued his story: “The problem with the move towards increasing the intrusive regulation is that people ended up believing that they had fulfilled their objectives for the client by obeying the laws, rather than obeying the spirit that ran behind the laws.
“The upshot is that the duty of trust towards your client is something that appears to have been lost in large swathes of financial services over the last 20 years.”
It’s not just in financial services that the trust has been lost. It is missing across corporate Britain, according to Sir Nigel Knowles, the managing partner of DLA Piper.
Speaking at Sheffield University last night, the Yorkshireman told the audience: “As someone who leads a major international business – a business based squarely on the concept of the trusted advisor and for whom trust is so central to everything we do – this crisis of trust has profound implications.
“Never has the success of business been so critical to the future of our country. Yet at the same time, never has business been held in such poor regard by those whose opinion matters. And never has the list of those whose opinion matters been longer.”
DLA Piper carried out some detailed research into the so-called “trust deficit”, which canvassed the views of more than 50 board directors at leading UK companies.
One of the respondents said: “Joe Public’s trust in business has undoubtedly suffered, and as a result, regulators are being brought in to try and restore or replace that trust, and possibly because there is now a regulator, instead of people relying on integrity and trust, businesses now think ‘if we’re in a regulator’s rules, I’ll play by those rules’ and then there’s a temptation to game those rules or push them to the wire because it’s a rule and it’s different from a trust-based system.”
The analysis is spot on. It’s a classic illustration of the law of unintended consequences. If you want people to behave like adults, you have to treat them like adults.
Sir Nigel said: “Regulation is what you must do. Best practice is what you should do. You can’t regulate trust into existence and you can’t legislate to make people trustworthy.”
But politicians have to be seen to be doing something, otherwise we might question what exactly they are for.
Chris Cummings, who travels the world on behalf of CityUK to promote Great Britain’s first-class financial and professional services industries, offered some useful insights into inward investment last week.
He was in Leeds on Tuesday to take part in a Marketing Leeds debate about the national economy.
Mr Cummings told me he was keen to open up the London-Leeds corridor and “help develop a centrifugal force which transplants high value jobs out of London and around the country”.
How, I wondered? Through case studies and policies that show how, he responded.
JP Morgan landed in London and wanted to expand its operations; it’s now the biggest private sector employer in Dorset, he said. Deutsche Bank, meanwhile, is one of the biggest private sector employers in Birmingham.
Citigroup could have gone anywhere in Europe, but chose Belfast for its technology and operations hubs to service the Europe, Middle East and Africa regions, said Mr Cummings.
It went for Northern Ireland largely because of its universities, said Mr Cummings, which went out of their way to find out what Citigroup wanted and then bent over backwards to deliver it.
“It’s about attitude. Can-do attitude,” said Mr Cummings, who said with some justification that the UK has been somewhat lacklustre in this department.
He added: “It comes down to a desire to win business.”