Chapter 26 - British financial institutions

Abstract

This chapter provides an overview of British financial institutions. The most important single source of capital is self-finance: just as the private householder relies heavily on his own savings when he buys capital equipment such as a motor car, a washing machine, or a bedroom suite, so the average business usually turns first to appropriations from profit as a source of capital. For public companies, the most important source was the new issue market. Issues of stocks and shares through the new issue market cannot be made by private companies as the flotation, unless it takes the form of a private placing of shares with no provision for their subsequent sale to the public, has to be accompanied by an application to the stock exchange for permission to deal and no dealings in the shares of private companies can take place on the stock exchange. Issues in 1979 by quoted nonfinancial companies totaled £1507 m. The banking business of England and Wales is largely in the hands of four banks, Barclays, Lloyds, the Midland, and the National Westminster that, together with two smaller banks, Coutts and Williams & Glyn's, enjoy clearing facilities through the London Clearing House. The six clearing banks had total sterling deposits at the end of 1980 in excess of £40 000 m and in addition owned a number of subsidiaries with substantial funds. About 40% of the deposits of the London clearing banks are on current account: these earn no interest, are withdrawable on demand, and can be drawn upon by check.