In one respect the City is more threatened than Wall Street. The opening up of European borders will pit British finance houses against the huge German conglomerates, the infiltrating American powerhouses and the self-protective French. The Wall Street firms at least have the stability of a huge market at home. The British are not so fortunate. So far in the consulting business we have done reasonably well abroad. Bob Dowcett, a director of Morgan Grenfell, says that the firm's growth in non-UK deals - from 18% of its total in 1985 to 55% in 1990 - is a particularly good indication of the City's success.
But even ISE chairman Hugh Smith admits that on the broking side not only will London's share of cross-border deals have to fall (it is now precariously high at 90%) but also brokers will have to be big and robust or smart and small to survive. Of the medium-sized firm he says: "That is the dangerous place to be."
Likewise London's stranglehold on futures and options is likely to loosen. LIFFE's Michael Jenkins says that London handles over half of European financial futures trade and 90% of the German bund trade. But he is keenly aware of history. The US, he points out, at one time had 100% of the financial business; now it has 40 or 50%.
This is the question in all markets: whether the cake as a whole will grow fast enough to keep London's absolute volume of business growing. Goldman Sachs partner Alan Gillespie believes that London "still will be the place where cross-border deals are done". But he pours cold water on the notion of some 1992 explosion of new business in Europe. "I can't say it will create more deals. Europe is all about internationalising, and that will continue to happen for years and years." European deals also do not promise the same rewards as the UK mega-deals of recent times. Many takeovers in Europe are friendly and it is said that two in three are negotiated without merchant bankers.
On the sharebroking front, James Capel's Alastair Ross Goobey warns that "the present level of trade is not an unusual phenomenon. It is certainly lower than four years ago, but it's better than 1980-81. The rest of it is cream on the cake." If his thinking is right, sharebrokers not only have to trim down now but must also be prepared to stay trim.
This idea is backed by another prediction. Clearly in a deregulated Europe mollycoddling of local businesses will be replaced by tough new efficiencies. Some economists say that the net effect will be up to a 50% cut in European production capabilities. The end result for the City is a much smaller clientele.
Which brings us to one final ugly matter. Quiet, insensitive and inhuman, modern technology is making its own bid to shoulder out the financial middleman. Reuters, friend of the new school of "the level playing field" and enemy of the old boy network, is doing everything that it can to wrench the advantage of the "nudge and the wink" from the City's established players. Its Monitor system, providing financial news to nearly 200,000 screens worldwide, has already "democratised" the flow of information. Next Reuters hopes to take over "bread and butter" dealing in equities, ie. those trades requiring no creative human input. Its fledgeling Instinet system already allows fund managers to trade share parcels direct with one another, eliminating the human broker. Dealing 2000 Phase Two, due out this year (forex dealing), and the upcoming Globex after-hours futures trading system hope to do the same in other markets.
One leading broker admits: "I just keep coming in and see someone sitting at a computer not moving, and I wonder should the computer be there in lieu of the person?" Tempting, but the truth so far is that in equities the machines are not quite making the required grade. "At least if there's a human being there you can talk about the deal," says Legal and General's Michael Payne with just a trace of exasperation. "Is it the right sort of market? Are you prepared to take it on or what? And he says 'Well, actually I know someone down the road who's happy to take 10 million on'. And then you're in business. It might even be a foreign investor not plugged into your fancy computerised system."
There is also the problem that machines hate to take on risks. If there is no immediate buyer for a share parcel, tough. A market maker, however, takes on the shares until he finds a buyer. This liquidity, and the market maker's ability to adjust prices for news events, is essential for big investors.
In any case, Payne and Prudential's Rodney Dennis both say that they want brokers' research, and dealing through them is the way that they get it. Paying independently for research would be far too expensive, and as Payne acknowledges candidly: "If we're paying commissions and thus get literally the first call on the telephone, we have an edge when it comes to news items. We can lean on them because of our size." Obviously the playing field still has its bumps, and understandably some players like it that way.