During the Covid pandemic, as most wages stagnated, workers in the City of London were enjoying bumper pay packets. Average partner salaries in one corporate law firm exceeded £2m for the first time. Investment bankers received their highest bonus payouts since 2008.
City bosses have long justified these exceptional rewards by claiming that they are available to anyone with sufficient intellect and willingness to work hard – regardless of their gender, ethnicity or social class. In the words of Goldman Sachs, one of the City’s most iconic players: “Advancement depends on merit … For us to be successful, our people must reflect the diversity of the communities and cultures in which we operate. That means we must attract, retain and motivate people from many backgrounds and perspectives. Being diverse is not optional; it is what we must be.”
But studies tell a different story about the City of London’s culture and demographics. In October 1986, the “Big Bang” – the name given to the sudden deregulation of financial markets to enhance London’s status as a global financial centre – was also supposed to signal the creation of a new, more egalitarian City. Yet four decades on, research shows that more than half of all partners at the leading law firms are white, male and privately educated, while more than 90% of bosses at eight top financial service firms are from society’s most privileged backgrounds – a demographic that comprises just over 30% of the entire UK population.
I began researching this issue more than ten years ago, after briefly working in business development for a City law firm. Despite being appointed in almost equal numbers to men, women were significantly under-represented at the firm’s senior levels, comprising fewer than 20% of its partners. There was also a striking lack of ethnic diversity among all staff, and it was especially rare to see any black lawyers.
Soon after I joined, I was offered a session with a style consultant who, my manager explained, would help me appear “more professional”. The consultant’s primary advice was to wear more make up and put on skirt-suits.
In any industry where people are regularly spotlighted as a firm’s most important resource, hiring staff for any other reason than their ability might appear to make little sense. In the City, however, white middle-class men have always been particularly valued for other qualities.
Consider this exchange I had with asset manager Toby* in 2019. I started by asking on what basis his clients selected their financial advisers, to which he replied: “They have expectations of meeting people with expertise, really.”
But when I asked how they assess this expertise, Toby said it was “a difficult question”: “I think they’re choosing us basically on whether they like the sound of us or the look of us. Most of our sales force is [made up of] white, middle-class males … Let’s try a thought experiment. If we turned up with, I don’t know, a black woman and a white bloke, but a bit spivvy with an Essex accent … Yeah, I don’t know. I really don’t know. God, that sounds really bad.”
Many City executives have told me that a certain type of “social ease”, often cultivated at private schools, allows colleagues to get away with bullshit and bluff. Or as one senior executive at a FTSE 100 firm put it: “We all know that people with the right accent and mannerisms … sound much more believable. Equally, I want to say that we can see through that – but the truth is, we can’t.”
‘We give the jobs to other posh people’
Many of my interviews were conducted in the late 2010s, a time when “diversity and inclusion” was a buzz phrase among elite City firms. I was keen to find out how serious these firms – spanning finance, legal services, management consulting, accounting and auditing – were about changing the social makeup of their staff, particularly those earning the biggest bucks.
Prestigious City firms, some with billion-pound revenue streams, have long tried to position themselves as “money meritocracies”, where success and promotion is based purely on an employee’s performance and the profits they generate.
Privately, however, City insiders I spoke to repeatedly blamed deviations from this rule on outright favouritism. One hedge fund manager, Michael, confided: “It’s easy to explain. Basically, we give the top jobs to other posh people who are our mates.”
Investment manager James said that frequently, recruitment and promotion “becomes a subjective call”, at which point decision-makers typically revert to type. I asked him what “type” that might be: “Myself … I’m already doing that role and I know what I’m doing. Therefore, I’m more likely to go towards the sort of people who are like I am, which is why you end up with the stereotypical male – mid-40s, white. It’s why the profession’s full of them.”
To date, efforts to diversify according to gender and ethnicity appear to have had very limited results. In 2014, The Sutton Trust found that within financial services, more than 60% of bosses educated in the UK had attended private schools, as opposed to just 7% of the population at large. And despite many interventions designed to improve representation of women at senior levels, a 2020 study of the City’s top “deal-makers” in investment banks found that less than one in ten were women.
I believe that City firms’ efforts to become more diverse and inclusive, and to deliver more equal representation at the top, have not worked because they were never meant to. Instead, they are a form of “reputation laundering”, offering only the illusion of change in order to protect their privileges and rewards. This conclusion is based on my interviews with more than 400 City leaders and workers – among them diversity experts and human resource managers charged with trying to change the culture of this rarefied world.
The phoney ‘war for talent’
Class-based recruitment strategies are perceived to offer City firms certain benefits – in particular, sustaining the impression of status and prestige to competitors, clients, potential colleagues and even policymakers. This in turn helps justify the high fees they charge, and the exceptional profits they generate.
Defining employee “talent” in narrow terms creates an artificial impression of scarcity in available skills. At entry level, City firms battle to attract graduates from the UK’s most elite universities. This “war for talent” is largely phoney – in reality, the skills the firms need are available from a much wider cohort of graduates – but it has helped convince both City firms and clients of these employees’ exceptional worth.
This narrative was invoked in the wake of the 2008 financial crisis when, despite being closely implicated in this catastrophic collapse, top bankers argued against punitive regulation on the basis that it would drive “scarce” UK financial talent to other countries. More recently, it was used to justify the very large bonuses paid out to UK bankers in 2022 amid the growing cost of living crisis.
One law firm partner explained why his firm preferred to appoint “polished” candidates from elite universities, in preference to the very best who might be educated elsewhere: “From a business perspective, you can’t afford to have people in meetings who will not look good to the clients, [even if] some might be very, very bright.”
In part, this can be explained by City managers adopting a risk-averse strategy for recruitment. In the context of a considerable oversupply of job applications, a “good” degree from an “elite” university acts as an easy signal of probable competency. As asset manager Reena explained: “If we hire somebody from a completely different background and they don’t work out, the person who hires them is going to look like a fool. [Whereas] if we continue to hire the exact same type of person – the Oxbridge-educated white male, for argument’s sake – and that person doesn’t work out, which often happens, nobody will blame the hiring manager for making that decision.”
Leigh, a former City trader, describes himself as a working-class “barrow boy”. He said that following the Big Bang in 1986, the City’s banks all started saying they had to recruit “only the best” university students: “They came from Oxford or Durham or wherever – anywhere that looked good and if they could bullshit their way in … Some of them were good, but not all. They’d come in as graduates and have to learn on the job, but they had no common sense.”
This is not to say that the City has no diversity at all. But demographics differ between job roles, and class differences are most tolerated in more technical or “quantitative” roles such as trading, where performance can be more objectively measured and perceived success does not depend on personal relationships with clients. However, even these roles remain dominated by men, while diversity is considerably more likely in less prestigious and often lower-paid middle– and back-office jobs.
The City of London’s way of ‘doing diversity’
In the early 2010s, when diversity and inclusion agendas were still quite new, Liam, a black corporate lawyer, sounded somewhat cynical when I spoke to him about the sincerity of these strategies: “Their dream scenario is to try and find a nice, uncontroversial way to try and ‘do diversity’ without having to change much of anything else.”
Several years after that, Gus, a partner at one of the “big four” accountancy firms, reflected on why they had adopted these diversity agendas: “Why does anything like this become popular? I guess we were quite influenced by what other firms were doing around the same time – and that’s probably still true today … It was just the buzz in the City at the time.”
While some firms have made efforts to become more diverse in their higher-profile, client-facing and revenue-generating jobs, when it comes to social class the focus has largely been on access rather than career progression. Thousands of young people, generally aged between 16 and 21 and from working-class backgrounds, have taken part in these social mobility programmes – often conducted with charities such as the Social Mobility Foundation, UpReach, the Sutton Trust and the City Brokerage.
This seems positive and in one sense it is. I have interviewed several hundred of these students as they aim to secure a career in investment banking or with other financial and professional service firms. Many described these opportunities as “life changing”, telling me uplifting stories of their experiences as they first engaged with the City – sometimes while still at school.
Aspirant banker Max explained how everything about the City seemed to him “oversized” – from the office buildings to the furniture that fills them: “I mean, you’re in this massive building with these massive tables and chairs, and really awesome decor and art, and there’s people who are really well spoken and really professional in their suits.”
Rahul sounded similarly awestruck as he described how growing up, he had seen the City from a distance but never expected to find himself there: “My father was a greengrocer. We used to go to the market and [on the way] we’d be able to see the City … I used to literally stand and stare over and imagine what it would be like to be there. To fast-forward a couple of years and be able to be at the [bank’s] office was quite amazing.”
Participants of these schemes were frequently told that, given the City’s “meritocratic culture”, they should have high expectations of getting in. As Emily put it: “They say all the time: it doesn’t matter who you are, you can do anything as long as you work hard enough.”
Sam described having learnt that: “Anybody could become the CEO of a major bank. It’s just all about sacrifice … To do well, to rise up the ranks, it’s definitely the people that are the hardest working.”
Yet the reality for these working-class interns could soon feel very different. On entering mainstream graduate recruitment programmes, some told me they quickly discovered that “merit is a myth”. When we spoke in 2019, bank intern Mishal, a black woman in her early twenties from a working-class background, described her experience in visceral terms: “What those people have been telling you [about diversity] is just the corporate crap that everybody vomits from their mouths … If you’d interviewed me [before] I probably would have said all those things. But now that I’ve actually been in a bank and seen it – I kept saying to my friends over the summer: “I have been sold dreams.”
Mishal’s disillusionment was striking. “[They’ve] told me one thing and then I’ve come in and it’s a complete opposite other thing,” she complained. “Your motivation has to be so strong, because everything they tell you turns out not to be true.”
Some of the interns I met felt very self-conscious of their “different” appearance and demeanour, compared with the image that is so carefully cultivated by these City firms. Kasia described one of her encounters during an internship at an investment bank: “My team had sent me to a meeting with about 40 white, middle-aged men. There was not a single female in the room … No one was below 35, 40 years old … I was just trembling with fear – like, I’m not valuable in this room.”
Many interns said they felt strong pressure to assimilate while navigating sometimes hostile and frightening cultures. Kasia described making efforts to change her look and accent, adding: “I don’t want to be viewed as a social experiment who’s come, like, from the street … I want to be judged based on my abilities.”
Young people like Kasia and Mishal are far from victims and would not wish to be seen as such – although neither went on to be offered a graduate job. However, it is clear that for some young interns, assimilation into the City of London is impossible – especially where class intersects with ethnicity.
Nor are these problems restricted to entry-level recruitment, as evidenced by lower retention rates and slower career progression for those who are employed. A 2020 study of eight major financial services firms found that employees from less privileged backgrounds took 25% longer to progress, despite no evidence of poorer performance. Describing how your educational background can cast a shadow over a whole career, asset manager Euan told me, only half-jokingly: “It’s like if you went to an ex-poly – in the City that comes with a lifetime of shame!”
Tanya, a black woman working for a City finance firm, graduated from a leading Russell Group university but still described the barriers – some blatant, others more subtle – that she felt had delayed her career progression within the firm: “It’s difficult to exactly know the impact because a lot of it’s quite subtle. But I’m always, always focusing on creating the right impression, the right amount of assertiveness … It’s exhausting and there’s less energy to focus on work. But you never want to come across as the “angry black woman”, so even when there is more blatant discrimination, it’s too dangerous to complain.”
The myth of merit
Many people are taken in by the City’s “myth of merit” – not least some of its top bosses, who prefer to believe their own positions are based on exceptional talent and hard work, rather than any inherited privilege. Attempts I have made to question this narrative, both during informal conversations and formal interviews, have sometimes met with robust responses. As corporate lawyer Kris said when we spoke a few years ago: “I came from a relatively humble background myself and I got into the system … I think they would be quite offended if you said the major City of London firms were unmeritocratic. I would be offended.”
And indeed, some working-class figures have acquired legendary status. In his biography of the City of London, historian David Kynaston profiles several, including John Hutchinson – a “brash whiz-kid” who took on a key role trading gilts at Merrill Lynch. Playing up the successes of such figures has helped to support the City’s meritocratic narratives.
The emphasis on merit also helps cement the impression that these firms are engaged in highly complex work that only the very smartest people can do. In her superlative work exploring the City’s US equivalent, Wall Street, anthropologist Karen Ho shows how this exaggerated narrative helped situate investment bankers as the epitome of control and technical competency, offering them a “naturalised” right to their place near the top of the social order – both in terms of earnings and status.
Similarly, in London since the Big Bang, a discourse of “smartness” (of intellect) has become central to the image of investment bankers and other City professionals. This means financial rewards which far outstrip most other sectors’ pay levels can be justified on the basis that they are fairly allocated to “only the brightest and best”.
Many City workers are exceptionally qualified and also very bright. By the 2010s, new entrants to investment banks in the UK were typically among the top 1% of performers in A-levels or equivalent. Corporate lawyer, Rob, explained that while in the old days “it didn’t really matter if you were a bit dim”, the arrival of the American banks in the wake of the Big Bang led to a more “intensive, more competitive style of work … more of a meritocracy”.
However, the City’s highly remunerated jobs are still overwhelmingly done by white men who have benefited from a private school education – the children of the affluent middle and upper classes. Furthermore, if any unfair recruitment practices or treatment of employees come to light, City firms typically employ the shield of “unconscious bias” to explain away any discrepancies in staff makeup or treatment.
This response can suggest a sort of “no-fault discrimination” where since everybody is to blame, nobody is. Some academics argue that putting a heavy focus on unconscious bias reflects a misguided, highly individualised response to what is actually a systemic, structural problem.
But in the City of London, my research shows that discrimination is also, in part, a conscious choice that offers systematic advantages for more privileged groups – while supporting an image of “desirable elitism”. And where this is the case, City firms prefer us to look away.
Investment banks are characterised by opacity and secrecy – sometimes justified by their need to maintain a “competitive advantage”. But the related use of non-disclosure agreements for employment contracts has meant that many discrimination cases involving City firms have never seen the light of day.
Where this was not the case, legal actions and tribunals have periodically shed light on instances of bullying and sexual harassment (leading to a more than £1m fine) and gender discrimination (£2m payout). There is strong evidence that the City’s historic “laddish” culture continues to exist in pockets, and that in some cases this leads to hostility towards individuals who exist outside established white, male, middle-class norms.
Why this matters
Over the past 40 years, inequalities of income and wealth have become more pronounced in the UK. The share of national income taken by the top 1% increased from almost 6% in 1977 to around 14% in 2019. The City’s remuneration practices are implicated here, with the Institute of Fiscal Studies reporting in 2022 that the City’s pay and bonus packages exacerbate inequality.
The UK’s cosy relationship between finance and politics enhances the City’s influence. Bosses and politicians alike claim this is justified because of the City’s major contribution to the UK economy in terms of jobs, tax revenues and trade.
Yet an alternative argument is that the UK’s oversized financial sector impoverishes the UK, resulting from what author Nicholas Shaxson calls the “finance curse”. He cites research estimating that an oversized City of London inflicted costs of £4.5trn on the UK economy between 1995 and 2015. This is explained in part by lost economic output since the 2008 financial crisis, and in part from “misallocation costs” as big finance has generated activities that distort the rest of the UK economy – diverting skills, investments and resources from more productive uses.
Shaxson also points to £700bn of “excess profits” and “excess remuneration” enjoyed by big finance which might otherwise have contributed to the UK economy. He suggests the salaries, bonuses and profits paid out by the City of London significantly exceed what is necessary to incentivise the supply of financial products and services in an efficient, competitive market.
At the heart of these eye-watering figures are policies first implemented during the 1980s, which privileged the need to maximise shareholder returns over reinvesting profits. This short-term agenda has been associated with rising salaries at the top, growing inequality in UK society, and even increased levels of environmental destruction.
At the same time, financial institutions have been afforded ever-more influence over UK economic policy. Wealthy City donors have helped fund political parties to ensure policies are prioritised that protect their interests. City leaders have not only shaped laws and regulations in their favour, but also influenced society and culture. This includes promoting a form of “winner takes all” individualism in which the notion of the common good has slowly dissipated.
In the UK, the poorest 10% pay a higher proportion of their income in tax than the richest 10%, while corporate tax avoidance strategies have additionally limited the redistribution of wealth. In 2015, the Bank of England’s then chief economist, Andy Haldane, warned that under our system, businesses are now “almost eating themselves”. He called on policymakers to consider new models of corporate governance that “share the spoils more equally between a wider set of stakeholders in a firm”, including employees and customers.
Will the City of London ever change?
In 2021, the City of London Corporation (the City’s formal governing body) set up an independent task force with a vision of encouraging “equity of progression”, where high performance is valued over “fit” and “polish”. I was a member of this two-year initiative, which culminated in the publication of a five-point pathway to achieve a more socio-economically diverse City of London.
The impact of this taskforce is debatable, but to be fair to its many committed participants, delivering more inclusive and diverse organisations is a “wicked problem” that is difficult, if not impossible, to solve. Not least because not everybody agrees on the nature of the problem – nor even that the problem exists.
Efforts at change have generally been pinned on the “business case” – that once hiring managers are convinced discrimination is irrational, they will feel compelled to act. Yet this is unlikely to work because the incentives are not there. Class-based inequalities embedded within systems and structures offer elite City of London firms certain benefits, while diversification carries perceived risks.
The business case sometimes suggests diversification will make the City a better or even safer place, by allowing for cognitive difference while preventing “groupthink”. But new entrants are generally subjected to strong socialisation processes that train them to present and even think much the same, as management consultant, Diletta, explained to me: “As much as [firms] talk about diversity, especially now with all this stuff on social class – it’s almost impossible to exist outside the norms … That’s what training is all about. We’re extremely effective at making sure everybody is packaged up and churned out looking and sounding exactly the same. That’s our product. It’s what we sell.”
It seems that in the City, people can be different as long as they are the same. A genuine desire among many City people to deliver fairer outcomes is no match for institutional inertia. When it comes to social class, firms have historically tended to adopt a “deficit” model where young people from working-class backgrounds are assumed to lack the necessary forms of “polish” to get on, and efforts centre on how these deficits can be addressed.
But the challenges they face are not limited to “polish”. Growing up poor in a rich society contributes to long-lasting and sometimes career-limiting feelings of stigma and shame. Abdul explained his feelings as he struggled to access a graduate position in an investment bank: “I was surrounded by people who were, I suppose you could say, better than me… I didn’t belong.”
An emphasis on social mobility is an attractive agenda for both City of London leaders and politicians who can present change as a “win-win” – for talented people and the organisations they join. But in practice, this is a zero-sum game: when opportunities are not expanding in absolute terms, for some people to move up others must move down. Current conversations allow City and other elites to avoid such uncomfortable truths.
Instead they focus on more palatable, less threatening questions of culture and behaviour, over the fundamental changes that are needed if the UK’s resources and rewards are to be more fairly distributed. The City of London must recognise its own role in perpetuating – and increasing – economic injustice if ever this status quo is to change.
This article by Louise Ashley, Senior Lecturer, Queen Mary University of London, is republished from The Conversation.