10 DECEMBER 1988, Page 27


People who live in glass houses can't afford the rent


This week a fusillade of corks saw John Robertson off from the City — the last senior partner of the biggest stockjobbing firm, itself gone with the jobbing system and the trading floor and the old way of stock-market life. Across the road another 450 people were seen off with less cere- mony, casualties of the new way. Their jobs disappeared when Morgan Grenfell chose to cut its losses and pull out of market-making in stocks and shares. Others have been withdrawing and retreat- ing in a piecemeal way, but unconditional surrender is a different matter. So ends Morgan's ambition to join the new way of life as an integrated investment banking house — how seductively those buzzwords used to sound. . . . Morgan bought Pin- chin Denny the jobbers and Pember & Doyle the brokers and put them together and booked space for them in the great new glasshouse going up over Liverpool Street station. A few weeks ago that booking was cancelled, at a saving (so the word then ran) of some £50 or £60 million — which would certainly serve to show what has happened to costs in this busi- ness, when margins and volumes have been slithering in the opposite direction. The odd thing is that the business itself is back to the old way, with turnover and, for that matter, prices much where they were in the year or two before the Big Bang. What has changed is that there are more competi- tors, some opting to compete by cutting margins, and all saddled with higher fixed costs. Their principal cost used to be people, who in a partnership would be paid (or not) by results. City people do not cost any less nowadays, but the crucial differ- ence is the new costs which must be paid whatever the results — the cost of the electronic dealing systems and the open dealing rooms in the purpose-built glass- houses. There are only two ways of tack- ling them, both expensive — play it long and hope to amortise them over time, or play it short and pack up. Morgan is playing it short. The market wisdom says that the first loss is the cheapest, and Morgan, taking its loss now, will not be the last. Some have looked as if they were waiting for a lead. And now, what happens to the boom in glasshouses? The City is glistening with them, and still they go up at a furious pace — over the railway at Fenchurch Street, over the roadway at London Wall, and down the river, where Samuel Pepys was stranded 'to my great discomfort in the unlucky Isle of Dogs, a chill place'. Others will now experience discomfort, and catch chills.