The City of London’s Financial Giants

The City, London’s financial district, is been home to some of the worlds most prominent financial, trading, insurance, legal and religious institutions and is a part of London that, apart from the architecture, has remained almost intact since the Romans settled in 47 A.D. The Square Mile – which actually measures 1.12 square miles, has a modest resident population of around eleven thousand, although its transient working population swells to well over 330,000 every day.

The overall Gross Value Added (GVA) for London represents around 45% of the overall sector at some £52 billion and the sector as a whole contributed tax revenues of £53.4bn.
Of the total employed in the City, 42% or 135,000 are employed in the financial sector (from 2009).

Classed as one of three key financial centres around the world, London plays host to many of the leading banks as well as the Stock Exchange and whilst The City is home to some, the influential banking and financial institutions have also spread into the Canary Wharf area. Only four of the top five UK banks are based in the City the other is in Edinburgh (RBS).

The top four London banks are: HSBC (Canary Wharf), Lloyds (City), Barclays (Canary Wharf) and Standard Chartered (City). Between them these four have market values of ~£240 bn. and assets of ~£5,500 bn.

Their employment numbers are substantial, however it is difficult to obtain exact numbers of how many are employed specifically within the 135,000 in the City of London. For that reason we look at the whole of the UK; HSBC alone has 85,000 employees in the UK, spread around its major brank and city centre network. Lloyds, in which the British Government holds a minority stake, indicates that it employs in excess of 104,000 (2010 figures). Barclays employs 146,000 (as at 2011) and Standard Chartered, 84,000.

Looking at Operating Income and stated gross margins for 2010, each is a substantial business:
HSBC – £12 bn. profit £8.3 bn.
Lloyds – £281 m, (£258 m)
Barclays – £3 bn. (profit not stated)
Standard Chartered – £3.85 bn. (profit not stated)

What is clear is that the banking sector within the UK, let alone the world has gone through an upheaval that is unprecedented and it may take some time to settle into a stable sector again. The British Government is under increasing pressure to return Lloyds to the private sector once more and is looking at many options including the restructuring of the bank into two separate – corporate and personal banking streams. Given their relative financial strength, HSBC, Barclays and Standard Chartered have demonstrated their ability to weather the financial maelstrom despite calls within Government to review and deconstruct the so called bonus culture.

Alongside the major banks, the city is home to the main regulatory body of The Bank of England, an institution to whom the key players look for guidance. It sets the level of interest (Bank Base Rate), currently at 0.5% (for a record three-years), and manages and monitors inflation by intervention in specific sectors as and when required. It is also responsible for the total amount of money flowing through the UK economy and regularly reviews this.

Lloyds, the insurance house, is also established in The City, and home to around fifty of the world’s largest insurance businesses with access to assets in excess of £40,000 bn. to support its infrastructure of risk underwriting and provides cover for every sector of business around the Globe. In excess of 20% of its revenue is derived in the UK.

Finally, the London Stock Exchange – often abbreviated to LSE, is one of the half dozen trading platforms around the world that are seen as the metre by which investors judge the health of commerce. It hosts a number of UK based indices – e.g. the FTSE 100, whereby the value of a business is posted daily in terms of its share price and capitalisation. In sheer scale, the level of activity is huge and in 2010 its market capitalisation was claimed to be £2.27 trillion spread across some 3,000 individual business listings.

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