London: Economic Dominance Through Financial Markets

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Lucas Kot-Zaniewski
14.04.2013
Internship Research Paper
Professor Thornhill
London: Economic Dominance Through Financial Markets
The City of London, which has become synonymous with a haven for the financial services sector, has regained its hegemonic position within the UK economy. Although it has been identified as a major factor in the economic crisis of the late 2000s, and despite being tied to numerous scandals, the financial sector appears to be rebounding stronger than ever. My experience at Union Investment Management (UIM), an investment house located in Mayfair Village, sheds some light onto the potential explanations for this configuration. One of the things I noticed during my first few days of work was the incredible time that the employees devoted to their jobs in order to maximise productivity. Financial services companies have offered a tempting bait for potential employees: a relatively flexible work environment unchained from the shackles of hierarchical constraint, as well as a good wage providing workers with a strong incentive. Capital markets have been the motor for the relatively successful British economy in the past three decades. The macroeconomic result of this was a large influx of immigrants, especially from Eastern European countries such as Poland. Another consequence is the penchant for Parliament reject any legislation attempting to restrain Britain’s financial cash cow.

Statistically speaking, financial services employees enjoy longer weeks than the average Britons. Hilary Metcalfe and Heather Rolfe from the National Institute of Economic and Social Research published a report that concluded that the mean full-time financial services employee works 2 hours longer than the overall UK mean (39 vs. 37 hours respectively)1. This difference does not seem astounding so one is forced to ask where this reputation for longer hours comes from? Certainly my experience at UIM supports the stereotype. Junior traders would come in between 8-8:30 and work until 18:00-18:30. After taking into account lunch, which would almost never exceed 30 minutes, the average work day at the investment house for the entry level employee was around 9 to 10 hours. This translates to almost 50 hours per week! The aggregate work-week statistics did not specify that 23% of financial services employees work over 50 hours a week which compares favourably to the overall UK mean of 18%1. My personal experience a well as the statistics clearly point to the conclusion that the success of financial services can be attributed to the work ethic of its constituents.

When trying to deduce the relative economic success of a sector we must obviously dig deeper than the average number of hours a full time employee works. A much more important indicator is productivity. The percent of total UK Gross Value Added coming from the financial services sector is around 10% while the respective employment is a meagre 4% which suggests that its productivity is approximately 2.5 times that of the countrywide economic average2. Once again, UIM does not fail to go along with the general trend reflected by the statistics. Employees at this company are given very difficult objectives to complete. The junior trader must get two accounts funded during each month and this is no easy task considering that the minimum account balance is 10,000 GBP. Unfortunately, many fail to achieve this requirement and are let go, as was the case with two people during my short two-month tenure. Management at UIM stressed the high turnover of the industry during meetings which put all entry-level workers on their toes in order to spike their effectiveness and overall work ethic. The increasing productivity of UK financial services has extended to other parts of the economy creating a regional economic powerhouse that compares well to other nations on the continent. My only office experience has come in Poland which I can contrast sharply to my current work...
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