UK: Outsider who changed the City.

UK: Outsider who changed the City. - Forced to flee from Nazi Germany, Siegmund Warburg landed in London, where he set up the influential bank, SG Warburg, and, as Rhymer Rigby reports, left an indelible print.

Last Updated: 31 Aug 2010

Forced to flee from Nazi Germany, Siegmund Warburg landed in London, where he set up the influential bank, SG Warburg, and, as Rhymer Rigby reports, left an indelible print.

Sir Siegmund Warburg was a remarkable man from the most remarkable generation of a remarkable family. While his assorted relatives invented America's central bank (the Federal Reserve), founded institutes and won Nobel prizes, he, as much as anyone else, was responsible for the re-emergence of London as a post-war financial centre.

Siegmund George Warburg was born in 1902, the only child of George Siegmund and Lucie. Although from an old German-Jewish banking family, originally from the German town of Warburgum (hence the name), his particular branch of the family tree had ditched finance for farming. Siegmund however, was a Warburg through and through. After university, despite a yearning to teach, he went to work for the family bank, where his cousin Max was already carving an impressive career for himself. From there, he moved to London where he worked for NM Rothschild, then on to the US and the bank, Kuhn, Loeb & Co.

Flight from the Nazis

Siegmund returned to Hamburg in 1930 as a partner in the family firm and, a year later, moved to Berlin to set up a branch office. Yet his tenure there was to be short-lived. National Socialism was sweeping Germany and the 'privileges' of Jews were being steadily eroded. In 1934, with £5,000 in his pocket, he fled to London.

Shortly after his arrival in London, he set up The New Trading Company, effectively a venture capital concern for financing new businesses. This was eventually to change its name to SG Warburg in 1946, when it started to act more like a bank, albeit a rather unorthodox one. Quite how unorthodox would become apparent later.

Siegmund also met Henry Grunfeld at this time, who was to become his friend and, later, business partner at SG Warburg. He became involved in providing advice to Jews whose assets were left behind in Germany, but his business remained little known in the City. When the second world war broke out, he served with British Intelligence.

After the war, Siegmund started to build up his bank with legendary care and prudence - quality mattered far more than size. Yet Warburg (as a 'nouveau' and a Jewish one at that) had always been something of an outsider, denied membership of the City's inner circle, the Accepting House Committee. By 1956, however, SG Warburg had taken over the venerable Seligman Brothers bank. With his seat on the board, Siegmund obtained the establishment membership it conferred.

Once 'inside', he wasted little time. The following year, it was open war with the old-school City and, by the time the battle was over, business in the Square Mile would never be the same.

The 'Aluminium War', as it became known, concerned British Aluminium, a business that ALCOA (the Aluminum Corporation of America) and another US company, Reynolds, had their eyes on. In best 'old boy' style, a pair of solidly establishment chaps, Viscount Portal (the wartime chief of air staff) and Geoffrey Cunliffe, had privately agreed with ALCOA to advise British Aluminium's shareholders to accept its offer (60 shillings a share).

There was nothing particularly insidious about this - the banking establishment approved and it was simply the way things were done - or were done before Warburg.

Victory over the establishment

Reynolds approached SG Warburg. The bank suggested they got together with a UK company, Tube Investments, which was headed up by another non-establishment nouveau, Sir Ivan Stedeford. The Tube-Reynolds partnership was prepared to offer shareholders 80 shillings a share, or 33% more than ALCOA. Predictably the City was aghast. Who was this interloper and how dare he? Among the bankers, only Helbert Wagg, another champion of fair play, lent Warburg support. So Siegmund used every means at his disposal.

Bypassing the boards, he wrote to individual shareholders. He pulled every Stock Exchange string he knew of. He even talked to the press. Due to his tenacity and the fundamental rightness of his argument, he won - in the process, dealing the entrenched City establishment a fatal blow.

Naturally this victory made him numerous powerful enemies but, over the following years, most grudgingly admitted he was right. Having become a player, Siegmund and his bank went on to wield enormous influence. Schooled in the ways of continental banking, he acted as consultant rather than big lender. He used syndicates to punch above his weight. He welcomed the markets and cultivated contacts. He advised the governments of developing countries; and, as wannabe teacher and intellectual, he brought a rigorous, academic approach to the stuffy world of banking.

Siegmund resigned as chairman in 1964 but, under intense pressure from colleagues, he assumed the bank's presidency. He was knighted in 1966 and throughout his retirement until his death in 1982 at the age of 80, he took a keen interest in the bank's affairs. As for the bank, it reigned supreme in the 1960s and 1970s, but many believe it lost its way after Siegmund's death. Nonetheless, it lives on (in a many times merged form) as Warburg Dillon Reed. Its founder's legacy goes far further - he is a key reason why London is mentioned in the same breath as New York and Tokyo today.

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