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London is a megapolis of almost 9 million, but when speaking of the financial center, we actually mean this small district, called the Square Mile, but more famously known as the City of London, where most of the financial institutions are based. Although situated right at the heart of the capital, City of London is in fact а city within a city. It has its mayor and governing body called City of London Corporation.
Nearly 2000 years ago, when Britain was just a remote colony of Roman Empire, this area is where London was established. Known as Londinium at that time, Romans built it as a port on river Thames. We have a video about the history of London, from Roman times to modern days, make sure to check it out.
Just like any other port, London started attracting commerce. More and more merchants and entrepreneurs were coming to do business here. Over centuries, what used to be just a remote outpost town for Roman Empire, became the capital city of a new, even bigger kingdom - the British Empire.
By the 17th century the city was a bustling hub for business and trade. Merchants established guilds and gained great power and influence on business, politics and military. They managed to secure autonomy and special rights for themselves.
The banking sector was also established and developed by merchants. The Bank of England, which now proudly stands in the middle of the City, was a private corporation started by merchants in 1694, in order to fund the government's military efforts during the Nine Year War.
Although the headquarters of banks and financial institutions are mostly situated in slick, modern buildings these days, around 300 years ago business and trading was being conducted mainly in coffee houses.
Coffee houses were very popular in London, and in 18th century there were several hundred of those within the Roman walls of London. Unlike modern coffee shops, coffee houses of London were something between private members' clubs and a pubs, where merchants, bankers, writers, scientists and men of various professions would gather to network and exchange ideas.
For example, The London Stock Exchange was started by stockbrokers who were conducting business in Jonathan's coffee house by the Royal Exchange, while the insurance market Lloyd's of London was named after a coffee house on Lombard Street, where merchants, ship captains and stockbrokers liked to gather.
By the end of the 17th century London was one of the biggest financial centers of the world; being a capital city of a huge empire, a port, a hub of a well-developed railroad system, it became a very attractive city for business. However it was still in the shadow of another city, that was considered the world's trading and financial center of that time - Amsterdam.
The capital city of the Dutch empire was flourishing in 1600s. It became home to the world's first stock exchange, and the trade of goods like cheese, sugar, tobacco, gold and, sadly, people, resulted in a spectacular spike in wealth of the city.
However, in 18th century, as the Netherlands witnessed an ecomonic and political decline, London grew more dominant, and was now competing with Paris to be the biggest global financial hub.
Things have changed when the First World War started, and it was more and more difficult for London to maintain its role as a center for foreign reserves. During this period, the USA gained more importance as a financier, and the New York Stock Exchange overtook the London Stock Exchange.
After the Second World War, however, the game changed again, when Eurodollar market developed in 1950s, and London took the biggest share of it. English common law allowed this lightly regulated market to develop and flourish, and soon hundreds of foreign banks and financial firms set up branches in London.
And although it is a matter of debate whether the Square Mile is more significant than Wall Street, no one would argue that London has been a leading financial city for decades now.
But there is a new dark cloud hanging over the Square Mile now, and that is Brexit. According to Ernst and Young, nearly 800 billion pounds worth of assets were moved from Britain to other European financial centers since the UK left the European Union. This move also makes London a harder destination for foreign talent, which has been a major aspect in London's prosperity for centuries.
It is hard to say whether London will maintain its dominance in global finance, or will become less attractive for major international firms, but we are definitely witnessing a beginning of a new chapter.
#london #finance #history