Britain’s banks and finance firms performed surprisingly well in the credit crunch and its aftermath because the industry is enormous, with good links to countries all around the world, according to analysis from leading academics.
Despite the conventional view that the City of London and its banks became too big and too complex, the paper, written by Professor Dariusz Wójcik at the University of Oxford and Dr Daniel Haberley at the University of Sussex, argues that the size and scope of the UK finance sector made it more resilient than smaller rivals.
“Our results suggest that this surprising resilience may stem from the uniquely diversified global connections of the City, which has been able to pivot, in the wake of the crisis, away from Europe towards more robust American and Asian sources of funding.”
By contrast, countries which had large finance sectors as a proportion of their GDP but which were not diversified – such as Ireland, Cyprus and Iceland – have suffered more.
Strength through diversity, etc.
Another good performer was Singapore. In fact, we could learn a lot from Singapore: a nation which trades on being the most sensible country in its region; a rule-of-law regime with strong property rights and lean public services.
Singapore also did well because it runs a government surplus when the going is good, so it had plenty of hard currency in reserve when the brown stuff hit the spinny thing. I hear the food is excellent, too.