Zak Mir Interviews David Buik

ZM: David Buik, City Legend, are there any qualifications required for this type of job if someone wants to follow in your footsteps?

DB: That’s a very difficult question because they don’t come more of a Luddite than myself, nor more uneducated for that matter – the only exams I ever passed were seven GCSEs. I fear that time has rather moved on since then. I mean that by today’s standards I would be described, and quite rightly so, as completely unemployable. So it’s quite hard to answer the question. You don’t need the brains, as you know, of a rocket scientist to do what I do. You just need a little bit of confidence, a little bit of experience and a bit of knowledge – and the ability to communicate. The greatest joy that God ever gave anybody in this world as far as I’m concerned is good company, and if you feel comfortable in good company or all company, the job is actually very easy.

ZM: Actually, you have answered what was a very difficult question I know – almost cheeky. But there are in fact many points arising from what you have said. The first one is qualifications in the City. These days you need more and more qualifications, while until about 20 years ago some could get into the City with no qualifications at all. Couldn’t it be argued that the City was a better place before the advent of qualifications overload?

DB: I think in fact there was more flare. Flare as well as ability. Flare was very important. Somebody who could smell markets in their nostrils, whether they were going up, down, moving. Whether there was long-term value. Today, as you know – you only have to look at the percentage of business that is done technically on screens, whether they’re auctions or programme trades – it’s regrettable but somewhere between 40 and 50 per cent of trades are done by mathematicians. And it’s got nothing to do with flare or whether you think the market could tank, or whether you think the market’s got more value in it. It’s “This is what the algorithm says…”, which I find very depressing. It’s certainly, from my perspective, not a market I would particularly like to be working in 2015.

ZM: Sorry, but do these algorithms work? We had the Euro/Swiss debacle earlier this year. Presumably, most got carted on that move? Algorithms or not.

DB: I think a number of people did get carted on that move, but I mean even you will find that all the central banks, whether it be the Fed, the Bank of England, or the Bank of Japan, are incandescent with rage against the Swiss authorities for giving them absolutely no notice, so that a movement of that nature could be massaged into the market. It was really an unforgivable thing.

ZM: That is assuming that the central banks actually know what they are doing. From the Euro/Swiss debacle, and obviously from our own ERM situation, pegging currencies is a failed strategy. As Mrs Thatcher said, “You can’t buck the market.”

DB: You can’t buck the market. But all you can say is that the quality of regulators today in comparison to even seven years ago is substantially higher. There are also more of them, and the leadership is much stronger than it was then. No doubt, this is helped by the fact that they had support from the government at a very, very, high level. So you are getting quality people like Andrew Bailey at the Prudential Authority of the Bank of England, and Martin Wheatley, who’s had his moments as well, but again I would describe as a quality individual. So I think to compare what’s going on today and what went on seven or eight years ago, or longer than that, is probably unfair. I mean the only thing that concerns me gravely at the moment – and I am hugely concerned about it – is when something’s gone wrong we always overcompensate in this country. And we are over regulating now.

ZM: Let me be unfair, because you could say that between those few who can trade or invest successfully and those who regulate, it is always going to be the latter who are one step behind the curve. They will always be shutting the door after the horse has bolted.

DB: Yes, but you know from what happened eight years ago, the first thing is we want no repetition of that at all. But on the other side of the coin, to hear after 52 years in the City of London that there will be in a year’s time no investment banking in the Royal Bank of Scotland at all! There is also a very badly shaved down Barclays Bank where most of the exposure will be in New York. HSBC is battered, scared and bruised by unfair treatment out of the United States of America, and also issues with the authorities over here will almost certainly transfer the valuation of their investment banking balance sheet away to Asia. They are already complying with the Chinese laws by sending 1,000 staff up to Birmingham to run their retail banking. This means that we are actually turning to the likes of Goldman Sachs, Morgan Stanley, JP Morgan Chase, Deutsche Bank and UBS saying, “Fill your boots and do it in London”. I think it’s just terribly, terribly sad. I don’t condone bad behaviour but we have gone completely over the top in my humble opinion.

ZM: What is the answer? Who is going to change this, because on the political side it is very difficult? You have a situation where the general public really doesn’t understand the City, so it is up to the politicians to play it by ear. It is just something they are lumbered with unless there is a scandal such as PPI, Libor or Forex manipulation, when they are forced to act.

DB: Well you know the politicians of today, regardless of colour, creed, or anything else, have to be prudent. They can’t afford not to take a measured judgement on these things. In other words, any kind of uncontrolled risk would be completely unsatisfactory in the current circumstances. But this goes to a subject that you and I have no time to deal with, which is the lack of professionalism in the world of politics. The number of people who’ve actually had a job, have had any commercial experience, any leadership experience, is extremely limited. That’s because if you have experience, you automatically are labelled with having a colourful past. Things go wrong with people who actually do things.

ZM: Eventually.

DB: Even Richard Branson has had a few failed businesses under his belt. But it seems to be that the press are very unforgiving on any blemishes at all.

Well again you’re going back to things that – and I’m substantially older than you are, but if you recall – even in the days of Patrick Sergeant, and Ivan Fallon, and all these other great financial doyens of the past, even Nigel Lawson when he was Business Editor of the Sunday Telegraph 50 years ago, is that they were on the whole lacking in what we call communications. They had no Bloomberg, they had no Reuters, they had no wall-to-wall television, they had no technology. Therefore the quality of journalism was down to the Cheshire Cheese in Fleet Street. You know, you poured a couple of bottles of claret down your Gregory Peck, got some information and went back to the office to write a story. Life is very much more sophisticated now, and the quality of journalist that you have, as you well know yourself, in my humble opinion is very high. They are a very unforgiving bunch because they pick holes in everything that’s going, which is what they’re paid to do, as a result of which they are very, very critical and the actual support for the financial services in the financial press is extremely limited.

ZM: That is because we have got the CEO fat cats, the bonuses, and sky high commissions from fund managers, the latest section of the City community to get it in the neck.

DB: Yes.

ZM: In terms of charges and things like that, where is it going to end? It could be the case within ten years that there is hardly any point in getting involved in the business of providing financial services at all. The death warrant is being issued as we speak.

DB: Well yes, I think you can be negative in your attitude and the way you put things across is the immediate hurdle that we all have to face. And I don’t think you’re exaggerating a point. But people seem these days to only learn when serious mistakes and errors of judgement have been made. As we know, this business of going up the aircraft gangway and turning left, and heading off to Hong Kong or Zog or wherever it might be, because the tax is better and you’ll be allowed to do it – that’s just a myth. What will happen is the capital will be appropriated to other parts of the world. This is why it’s very sad. And you know, the European Union will learn by its draconian stance and by the hopeless interpretation of regulation being done on a global basis. Even the Bank of England thinks regulation should be done on a global basis. I do not. How can you possibly compare the criteria that is required from British banks over here – we’re basically mortgage lenders – to countries in Spain and Portugal and France where they can’t even spell it? So how you could possibly have the same criteria for regulation? I don’t understand. That’s where I think they’ve made a serious error of judgement. We’ve waited for everybody else to dance and sing from the same hymn sheet. That’s just nonsense.

ZM: I am going to put you on the spot again. In terms of a wish list, if you were King David of Buik, are there any obvious things you would change? Glaring things that we have wrong in 2015 and which we maybe did not have before in the City?

DB: What we have in the City basically is that the whole of the City of London now is tarred by the brush of the ailments of maybe a couple of hundred people. This I find terribly, terribly sad. I really do. The idea that we should not be involved in investment banking is just utter nonsense, as far as I’m concerned. If you need to have more capital in that part of the business, but under the same banner, then so be it. I’ve got no problem with that. I don’t have a problem with regulation. But what I do have a problem with is when people slam the door in the face of flare. I find that completely and utterly illogical and ridiculous. And it’s political pressure, it’s the establishment, because they feel that their only way of getting themselves heard is to thump the tub, and think that they’re making a tremendous contribution to society. They’re not. Where we’re woefully weak is 650 members of parliament, where probably 500 haven’t got a clue about the commercial world. That is really detrimental to serious decisions being made on regulation and on commercial practice.

ZM: Just to be cheeky once again. You are not exactly a fan of the European project. But how much better is the Westminster project. It looks as though it is absolutely in tatters. Not just the scandals and historic horrors, but the whole model of the second house and the expenses. The only plus point with Westminster is to be ruined by your own people rather than people who are abroad. Indeed, you don’t hear of as many scandals from Brussels as you do from Westminster.

DB: We won’t, for the simple reason that you can add Paris, Frankfurt, Brussels, Amsterdam, Rome, Madrid, list them all together, and they won’t make up the size of London as a financial centre. If that’s the case the quality of risk management for want of anything else is far greater. So when something goes wrong it’s going to go horribly wrong. What I’m saying is, what strikes me here at the moment is that we don’t have any balance. We do not want what happened before the financial crisis, no doubt at all. But what we do want is the ability that if there is good business around, or people have flare to creative business, that they should be given an environment to do it with decent regulation.

ZM: May 7^th is fast approaching, and in terms of the General Election result Nigel Farage is hoping that he will have a say in the outcome. So is Alex Salmond. Is there any happy scenario you can think of in terms of what is going to happen?

DB: No. I mean basically my political affiliations will come as absolutely no surprise to you at all. And, you know the idea that I would have Ed Miliband as my Prime Minister is not one that fills me with great joy, and even if I wasn’t at the advanced age of 71 I certainly wouldn’t be able to do backwards summersaults.

ZM: And you would not have two kitchens either.
DB: No, I wouldn’t. The point I was going to make to you really and truly today however emotional I want to feel about the idea of a Labour Government, or a Labour coalition, or any government at all, is the fact is decisions in the United Kingdom are not made domestically anymore. Mr Cameron is incapable of controlling immigration, the world outside decides what happens about currency flow. Pretty much every decision about anything that happens is a global one. Therefore who wins or whatever coalition it is, there’ll be a different emphasis on the type of business, or the business environment. But anybody who thinks because we’re going to have a Labour government that the whole world is, or the whole of the United Kingdom is just going to fall over, I think just deludes themselves. It’s not going to happen. It’s going to be twice as tough to make any money, and the concern is that of course unemployment will go up because incentives will go down, and therefore people won’t invest and without investments you’ve got very little chance of creating wealth. But I’m afraid a Labour-led minority government or any Labour-led government has to learn by its mistakes, because it doesn’t believe what business, industry and commerce tells it.

ZM: You are saying that the optimistic side of that is just that money flows and external political contingencies will probably govern this country alongside Labour in a way?

DB: Any government. I honestly generally believe it’s the same for a Conservative-led coalition. What I do say is that the emphasis would be different. Currently the UK is a terrific environment to do business. I actually believe in my heart, because he’s never given me any reason to disbelieve it, that Ed Miliband’s heart is probably in the right place, because he has a massive social conscience for which nobody could possibly be chastised or criticised for. The trouble is with him he’s not balanced, he is anti-business, and that comes across a vibration very, very strong wherever you go and whoever you talk to. I haven’t found anybody who’s said, “You know you can trust him and he really is on business’s side”. He’s not. I think Ed Balls is pragmatic. I think his macroeconomic outlook is probably not unsound. But his micromanagement of it and understanding what is required to keep incentive going, is to keep people going back to the world and investing in business, industry and commerce. He doesn’t get it like Ed Miliband but he does understand the big picture. He might be many things, Ed Balls, stupid he’s not.

ZM: Do you think that we are probably going to have a coalition, probably a Conservative coalition, because they have done enough to prop up the housing market and the jobs situation? A Cameron coalition second term, with business as usual? The same as we have at the moment? Is that the best scenario do you think?

DB: Well I think you’re writing a script that everybody in the City would love to have. But I’m not certain it’s going to happen because one thing that concerns me hugely is that the campaign which has been underway now for some weeks, clearly Lynton Crosby has got the Conservatives singing from one hymn sheet and that hymn sheet says, it’s the economy stupid. Well that’s all very well, but you know basically if you live outside the South East of England and London, and some of the very richer parts of Manchester, they haven’t seen this huge rally. And therefore you have to give them hope. What I don’t think either party has got the slightest idea of how to do – and don’t ask me because I don’t have any idea either – is how you close the gap between those who have become very rich in the last 10 years. It hasn’t been since the Conservatives have been in, it’s since the last 10 years and there have been those who’ve not seen their standard of living rise at all. And that is, I think, a huge problem. And even if Miliband is not plausible, which he is to me, if he can get that message across who knows what’s going to happen on 7^th May. I’d like to think David Cameron and George Osborne, 100 per cent deserve another chance because of what they’ve achieved in very, very difficult circumstances. Whether they’ll be given it, I have my doubts.

ZM: Thank you, David. Hopefully, we shall speak again soon.