IF YOU'VE GOT IT, DON'T FLAUNT IT

In the City, cash is back. But this time, says Martin Vander Weyer, it's going on

the mortgage first, not the Porsche

TEN YEARS ago this week, The Specta- tor carried a cover story which will be quoted by social historians centuries hence as a definition of the mood of the mid-1980s. 'The new club of rich young men', by Nicholas Coleridge, was one of the first and best portraits of the City type who became the symbol of the age, with his six-figure pay package, his shiny car, his habit of swigging fine claret in bars, his throwaway investments in the theme parks and bloodstock, his 'complacent conversation about tax avoidance'; above all, his rampant enjoyment of his own good fortune.

`Some commentators give the boom three years, others five to seven,' Coleridge noted, and five turned out to be right. In my recollection, 1991 was the grimmest year in the City. But five years further on and the wheel has turned again: despite countless casualties, collapses and false starts, big money is back by the bucketful.

Share prices may have tumbled this week, but most major trading markets have been strong and relatively predictable since last spring. Industry and finance do not often prosper at the same time, but that happens to be the case at the moment: corporations can raise all the money they need for their expansion plans and takeover bids, which means more fees and trading opportunities for bankers and bro- kers. Forte v. Granada alone chipped in £150 million or more.

The job market is correspondingly hot. The Germans, Swiss and Dutch have been increasing their London presence, often by buying and rebuilding British houses which had failed to keep pace. Barings has returned from the dead and is reported to have had a spectacular year under Dutch ownership, having advised in huge deals like the Glaxo-Wellcome merger and Lloyds Bank's takeover of TSB. Warburg is out of intensive care after radical Swiss surgery. Deutsche Morgan Grenfell, having exorcised the Guinness scandal, is recruit- ing frantically. On the domestic front, NatWest Markets (for Guinness scandal read Blue Arrow scandal) is making an aggressive comeback. My own former employer, BZW, is moving to vast new premises in Canary Wharf. The Japanese and the Americans are still here in strength.

All of which means that £100,000 bonus- es are commonplace, and £250,000 annual packages are nothing to shout about. Such sums are no longer limited to the Square Mile — any public company or utility direc- tor would aspire to be up there — but it is still only the financial sector which throws six figures at middle-ranking executives in their late twenties and seven figures at high-scoring computer-nerd derivatives dealers. And what is interesting, given the level of shouting that went on last time round, is the relative bashfulness of this season's recipients. Consumption may be coming back into fashion, but it is far from carefree and it is doing its best not to be conspicuous.

Some anecdotal examples confirm that the money tide is flowing. An equity sales- man, back in work after a period of redun- dancy, tells me what a relief it is that his Filipino maid has returned from home leave with a husband, who can now become the family chauffeur. A top foreign exchange dealer, also out of work within the last 12 months but now running a large European-owned trading operation, tells me he is auditioning rock bands for his forthcoming birthday celebration. A hard- working corporate financier reveals that she has just returned from a five-day fancy- dress Chinese New Year party for 200 jet- setters in Havana. Bespoke travel agents Abercrombie & Kent say that (while mid- market tour operators are suffering a dras- tic drop in bookings) demand from City types for £4,000-plus Amazon cruises and `black-tie safaris' is 'ticking along quite nicely'.

But ticking along, rather than booming, is a fair description of most categories of economic activity which depend on the trickle-down lubrication of the annual bonus season and the head-hunter's offer. Demand for second-hand Porsches has gone up, for instance, because the typical bond-trader no longer feels that he can afford a new model or can no longer demand that his employers offer him one as a company car. Many City firms now no longer have car schemes for employees at all, or offer only mass-produced Fords and Nissans — hence the number of Sloane mums on school runs in rugged four-wheel- drive Nissan Patrols.

An even better indicator of the degree of flash with which City boys are ready to part with their cash is the market for `classic' cars, those collectors' items which tempted Lord Brocket to his recent down- fall. Stewart Skilbeck of Brooks Auction- eers in Clapham cites the price of the Jaguar XK140 roadster as a sign of the times: the record was £80,000 in 1989, when City punters were willing to gear up with bank finance to catch the last spurt of a fast-rising market. By 1992, the price was down to £25,000; the only buyers were serious motorists with oily fingers and bobble hats, whilst the finance corn- panies found themselves owning an unex- pected stable of vintage Jags.

But prices have been strengthening steadily over the last 18 months, to £35,000 or so, and 'the yuppy element is just begin- ning to creep back in'. (I tested this feel- good index on the first stockbroker I met last week: he turned out to own an XK140 himself, which seems to prove the point. `Thirty-five K?' he pondered. `I-Imm, things are looking up. . . . ') The upper strata of the property market reflect similar patterns. According to Sav- ills, the City accounts for about a third of buyers of prime central London houses and flats. Prices in that sector rose strongly in 1993 and 1994, bouncing back from the heavily discounted levels of the recession, but then they slowed down again. Only in late 1995 did they creep past the all-time highs of 1988-89. Having regained their long-term trend line, they now seem to be sticking to it — rising very gradually, that is, rather than booming above the trend line in preparation for another cyclical bust.

So the evidence suggests that big earners are, for the most part, behaving with uncharacteristic prudence and decorum, barely waving their wads at all. I checked this impression with Nicholas Coleridge, now managing director of the magazine publishers Conde Nast.

`Certainly it's true that the good times are back,' he observed, pausing to take in the view from his Hanover Square office. `Every luxury shop site out there is occu- pied, every luxury business is launching something new. Grand party at Asprey's last week, big new Armani store in Sloane Street, Donna Karan in Bond Street, you name it. But from the consumers' point of view there's a certain amount of furtiveness about it all. There's no boasting. There isn't the same "look at me" attitude as last time round. People who are doing well now go out of their way to say what a struggle it's been, that things are more difficult than they really are.'

Coleridge fixed the age range of his 1986 subjects at 27 to 34, so it is quite likely that many of the people who displayed such vul- garity and greed last time are back among the furtive, self-effacing big earners of today. Some of them, perhaps, are simply older and wiser; but there is a great deal more psychology to it than that.

`Negative equity' is the phrase pundits reach for first to explain the current mood of consumer cautiousness. The facts are (according to the Woolwich Building Soci- ety) that the number of households in Lon- don and the south-east which are stuck with this problem actually rose in the last quarter of 1995, from 460,000 to 490,000, with an average deficit of £10,000 each. Within those figures are City youngsters who were first-time buyers of wildly over- Priced Docklands studios and Notting Hill basements on 100 per cent mortgages at the peak of the boom. The slightly older ones, more comfort- ably established in the sort of 'prime' prop- erties covered by the Savills survey, ought to be well out of the trap by now. Never- theless, as I have written here before (`Bankrupt but not broke', 16 July 1994), the fear and humiliation which were char- acteristics of the crisis of personal debt over the past five years have left a scar on our collective consciousness. Debt is once again something to be ashamed of, rather than something to be manipulated for play- ful advantage, and it is no longer dimin- ished by inflation or balanced by ever-rising equity in bricks and mortar. When big bonuses cathe back, therefore, many recipi- ents' first instinct was to pay off their mort- gages, or to save the cash for an uncertain future when more borrowing might other- wise become necessary.

It is the fact that none of these people believe the future to be any more certain than the recent past which is the key deter- minant of their current economic behaviour. The 1986 boom was the first in living memory, perhaps the first of its kind ever. The people whom Coleridge described were rewarded indiscriminately, either because they worked for employers who were buying market share irrespective of profit performance, or because they were able to spend cash profits from their property deals, or both. It was like Lottery fever with much more generous odds, and it felt at the time as if it would go on forev- er. But now we know better.

There could have been no more vivid reminders of the white-knuckle ride of the last five years in the financial world than the calls I paid on two old City friends last week: to one on the brand-new, thriving, Prince's Trust swings into action Dutch-financed trading floor of born-again Baring Securities, and to the other in the rather more subdued atmosphere of the vis- itors' lounge at Ford Open Prison. I find it hard to list half a dozen City acquaintances who have not, since the turn of the decade, been fired or radically restructured or forced to cling to their desks as their employers passed through one near- terminal crisis after another, or been led into disastrous temptation, or suffered stress-related medical problems and marital crisis.

Tough, you may say: that is merely the risk side of an equation in which rewards are extravagantly large. And you would be right. But back in 1986 few of us could have imagined how turbulent the future would turn out to be.

There is no longer any job security, except for the highest performers — and for them the biggest rewards may be tied up in long-term incentive schemes (Bermu- da-based trusts, for instance) designed to make them immune to head-hunters' blan- dishments. There is no longer any such thing as a free ride: individual performance is relentlessly monitored, fierce internal competition encouraged. Collegiate trust and esprit de corps, where they still exist, are relics of the past. Careers may take off fast, but they are increasingly likely to fin- ish early, perhaps not far beyond 40.

In the circumstances, therefore, it is hardly surprising that the type who ten years ago would have blown his bonus on a Ferrari or a vineyard is nowadays more likely to put it into a school fees policy or a personal pension plan — perhaps allowing himself just one discreet extravagance from Asprey's or the Abercrombie & Kent cata- logue on the way past. He does not want to buy a more expensive house, because his present one in London W14 would be so difficult to sell and his dream home is in any case no longer an estate in Gloucester- shire but a house in W14 without a mort- gage on it. He likes to dine out, but he prefers to do so in busy, value-for-money Conran ventures which all his friends can afford, rather than voluptuous, exclusive parlours like the Manoir aux Quat' Saisons. He does not want to be caught bragging about his wealth, because that just isn't done any more.

The effect of all this is that the late- Nineties club of rich, not-quite-so-young men (and women) is not going to let its wealth ripple noisily away through wine merchants and car-dealers or evaporate through luxury riverside developments and tax-free business schemes. Those who have learned the lessons of the last ten years are more likely to husband their wealth quietly, even boringly, like Swiss gnomes and Bel- gian dentists. But, human nature being what it is, naked greed and brashness will surely be back one day, after an era of restraint and Blairist righteousness: per- haps in 20 years' time, among the children of the class of '86.