Historically the City of London was the financial entrepôt of the British Empire. The loss of empire might have led to the collapse of the City's industries, just as it contributed to the downfall of Tyneside shipbuilding and Lancashire textiles. Instead, in the last 50 years, the City of London has flourished by becoming the world's foremost centre for international financial transactions.
Whereas in the late 20th century the British economy as a whole fell behind the global average in the growth stakes, the UK's international financial services industries enjoyed a long boom. Partly because the output of the financial sector tends everywhere to increase faster than that of manufacturing in the course of economic development, the City of London was impressively dynamic even in a fast-growing world economy. Official data show that in 1986 the UK's exports of financial services were £2 billion. In 2008 they were £52.8 billion, implying a compound annual growth rate over 22 years of 16 per cent.
But the £52.8 billion figure does not allow for a range of ancillary activities, such as the legal, accounting and information technology back-up required by the financial products of the modern world. In recent years the "City cluster" — with the ancillary activities included — has probably accounted for exports of £70 billion a year or more, roughly equivalent to 5 per cent of our national product and almost a fifth of our total exports of goods and services.
Again historically, the prosperity of the City owed much to the Bank of England. Privately owned until 1946, it retained its private sector ethos for a few more decades. When the structure of securities trading was transformed by the Big Bang in 1986, the Bank — discreetly, but deliberately — encouraged the large British clearing bank groups to participate in the emerging boom in international financial services. These services, such as foreign exchange trading and the origination of derivatives, were "wholesale" in character and often very complex. They had relatively little to do with the clearers' traditional retail business.