THE JOBBING SYSTEM OF THE LONDON STOCK EXCHANGE: AN ORAL HISTORY

Interview No. 15:  Val Powell

Interviewer :  Bernard Attard

Institute of Historical Research: 9th March 1990

Tape 1, Side 1

BA:  Can you first tell me, Mr. Powell, where and when you were born?

VP:  I was born on the 9th of November, 1939 in Winchester, in Hampshire.

BA:  And who were your parents?

VP:  My parents were Lewis Alfred Powell and Joan May Huxley Cowan.

BA:  And what did your parents do?

VP:  My father was in the Stock Exchange.  He had gone into his father's firm.  At that stage it was L. Powell and Sons.  That in itself had been the result of a de-merger of the brokerage firm at the time when Stock Exchange firms were free to decide whether or not they wanted to act in single capacity or in dual capacity, effectively where we end the interview, as you might say.  Anyway, my grandfather was one of four brothers and he elected to be a jobber and so deserted his brothers who were brokers, and it was my grandfather who set up the firm of L. Powell & Co, Jobbers, and it was my father who joined him in partnership in the early 1930s.  

BA:  Had any of your great grandfathers, or generations beyond your grandparents, been in the Stock Exchange?

VP:  From memory various uncles and relations had, but I can't with certitude, speak about anything beyond my grandfather and his brothers, all of whom were in the firm of L. Powell and Sons.  I suspect that there were relations prior to that.

BA:  Do you know which markets they were jobbing in?

VP:  The main market in which we jobbed was the rubber market.

BA:  And had it always been assumed that your father would go into the jobbing firm?

VP:  I don't know that it had been assumed, but my grandfather lived not far from London in a place called Banstead in Surrey and it was an easy trip to London.  The hours were quite reasonable and my father was able to join him and enjoy the degree of physical recreation which at that time seemed appropriate to a young man of 22, in that he could get the afternoon off to play football or cricket and indeed he played cricket for Surrey himself; so, that was one of his main motivations.  I suspect in those days before the War it was a method of convenience, as was everything else.  His younger brother, my uncle, Copper Powell, didn't have quite such an easy time of it.  He, in a sense, was put out on probation and he went out to work in India for the Government broker.  He spent really the pre-War years in that position.

BA:  What did your grandparents do on your mother's side?  Were they Stock Exchange people also?

VP:  No they were not Stock Exchange people at all.  My grandfather was a doctor and he had a practice in Chipstead in Surrey and therefore the local connection would be obvious.  He in fact was a military doctor originally and bought a practice when he came out of the Army between the Wars and set up there.  My father, in fact, was divorced before he married my mother and there were no children from the first marriage.  It was just one of those things which didn't work.  So he asked whether or not he could marry my mother at the time.  There was a good deal of contention because it was not considered socially acceptable to marry a divorced person.  People like the King's proctors were about who observed behaviour very accurately, so there could be no question of scandal or fixing the odds.  But nevertheless they endured the trial and were very happily married for, I would say, 35 years, something like that, before eventually, my father died.

BA:  Did you know any of your grandparents?

VP:  Yes, I never knew my father's father, but my father's mother I knew very well.  She lived to be a very old lady.  In fact she survived my father's death, and I knew my mother's father and mother, my maternal grandparents extremely well.  They were very gentle, genuine people and I knew and respected them a great deal.  I was very lucky.

BA:  Did your father and uncle stay with L. Powell & Sons, or & Co.?

VP:  Yes they did, they both stayed with L. Powell & Co. In fact, my father always told me that he was very nearly bust before the War because the idea of the old jobbing firms was that you dealt in a particular market, in this case in the rubber market.  As taxation and so forth were extremely low in those days you could afford to live off a modest income, quite well.  The markets were cyclical, and the technique was that in the good years you stored up the returns from which you lived off in the bad.  And I think if you trace the history of very many small jobbing firms prior to the Second World War you will find that several operated on that principle.  Some of which, of course, didn't survive, because they went bust if they got it wrong.  And it was very much a question of new firms starting up, new firms going down.   There were no big firms in a sense who dominated the market, such as was the case after the War.  But in those days it was an approved principle.  And my father always says that he was, as a junior partner, technically bust, in one of the bad times, but he managed to survive.  My uncle, of course, didn't come back until just after the War.  My grandfather retired in 1932, I think I'm correct in saying, so he left my father as a junior partner with four or five other people who were operating up until the War.  My grandfather died in 1938, and then in 1939 my father was called away to the War and he left in charge of operations three or four of the senior partners at the time, one of whom was a gentleman by the name of C.D. Pinchin, and it was the custom of the time that the name of the firm should take the name of the senior partner.  Therefore L. Powell & Co. became C D Pinchin & Co. and that was really the beginning of the jobbing firm as we knew it after the War.

BA:  Did you have any brothers and sisters?

VP:  I had three sisters. I was born just before the War. My elder sister was born after the War and, followed by a third sister quite shortly after that, then a fourth sister who was not born until I was 17, so we were quite a spread out family.  

BA:  And where did your parents send you to school?

VP:  They sent me to a small prep school by the sea, because it was regarded as fashionable to take the sea air.  I can't say I enjoyed it terribly, chiefly because it was such a long way away, and you really did go away for thirteen weeks and never saw your parents from one end to the other.  However it was, no doubt, good for me, and I left there and went to Winchester College, where I was educated between the ages of 13 and 18.  And I left with the approved number of A-levels.

BA:  Was there anyone at school who'd been a particular influence on you, a master, or group of teachers?

VP:  Yes, Harry Altham probably was the master who looked after my interests most of all.  He was a wonderful man.  He wasn't my housemaster - he'd retired by then, but he was a very considerable humanist and cricketer.  He had four or five eclectic interests, but what he knew about them was just nobody's business.  One of them was Georgian silver, another was stamps, another was Ming china, cricket and Winchester Cathedral.  He was a great classicist.  I think he probably interested me in the classics more than any person possibly could have done.  He also made me read.  So that whilst I am hardly a well-read person, such reading as I do have would be entirely down to Harry Altham, and his many other interests.

BA:  What did you feel that the attitude, if any, to the Stock Exchange was, either among the boys at school or the masters?

VP:  I think that at that stage the City had some mystique about it, that would be perfectly true.  Whether it had the mystique about being a career which would earn you a great deal of money rather obviously, as opposed to any other form of commercial living, I'm not sure at that stage.  I think the question of going into industry, which was quite definitely unfashionable somewhat later after the War, had probably not come into vogue then.  There were still a lot of people in industry and commerce who would follow their father's footsteps into that way of business, rather than coming into the City.  The yuppie atmosphere was certainly not part of it.  Nevertheless, I think if you wanted to make your way in life and make some money, the view was beginning to form that you should go to the City rather than into industry.  In a sense the commercial pressures about bricks and mortar and heavy industry and fixed assets and low wages, and 'my boy, you take your turn in life' was beginning to be overturned by the rather more active free-wheeling, 'you get to the top quicker' type of atmosphere that the City was beginning to engender.  But I think it would be true to say it was ambivalent.  Nobody had a firm view.  But clearly a number of children were heading towards the City and the professions in that period after the War.  It wasn't an obvious place to go and get rich quick.

BA:  Had the Stock Exchange impinged on your upbringing in any way, insofar as your father was a jobber?  Did you ever form some impression about what your father did or what it was all about?

VP:  Oh, yes I think quite definitely.  My father in those days - one should say post-War when he returned to take up the business - worked extremely hard.  But the days were reasonably compressed in that you started your business at 9.30 to 10 o'clock, it was finished at half past three 4 o'clock, and it was possible to catch a train home so you were at home in Hampshire some 60 miles away at 7 o'clock and you could see your children before they went to bed.  And therefore I did have always a chat with him every night, in which we talked about many different things.  Sometimes of course it was all about the City and I can remember if it's not inappropriate to say, 'Did you have a good day' and sometimes he'd rub his hands and say 'Yes today was a real jam and cream day' and one got an idea that he had a very good one; whereas you'd ask him another day and he'd say 'no, no good, you'll have to have water tonight'.  And one got a flavour that it was very volatile; some days were good, some days were bad.  He would never enforce his daytime life on one, but he was always extremely ready to talk about it, and one got an early view that his dedication in life was the building of the business that he was involved in every day in the City, and that it was his abiding interest.  And he was clearly being successful at it and he was a very forceful personality, so it did rub off on one.

BA:  And would you say either he or your mother had a particular influence on you?

VP:  Well my father was a very tough disciplinarian, so yes, clearly.  She was much more mellow and if you wanted an easy life, you nearly always asked her for things.  But at the end of the day I respected my father enormously.  Yes, he had a terrific influence on my life.

BA:  What would you say the attitude to money was in the family?  

VP:  Well, it was very puritan.  He was brought up by a generation who regarded it as immoral to owe money, and so he never had a debt, and he never allowed me to get into debt;  if ever one did, one was sure to realise that he would find out at the end of the day and therefore it would be better to own up.  I think it would be true to say still that it has a tremendous influence;  one does not willingly go and borrow money.  It is interesting to say that he never bought his own house.  He was quite pushed for capital, I think, after the War, and he found a great friend of the family who was prepared to let his house to him, so we lived in a let house in the country, which was a lovely house, and achieved all that it wanted.  But at one stage he tried to buy it, but the landlord didn't wish to sell it, and said 'no, I think the arrangement which has looked after us very happily for twenty years since the war, can carry on,'  He never actually owned his own house; so, in a funny way this great puritan streak about never doing things which you couldn't afford led him, in terms of personal wealth, to make some not very good decisions, particularly in the inflationary era post-War.

BA:  We leap back to your school days.  Did you make any plans for what you'd do once you'd finish school?

VP:  No, when I left school, I finished right at the end of National Service and I wasn't very military-minded, so I decided that I would not go into the services voluntarily.  So I had a year away after leaving school, now very much the vogue - the gap year - in those days not very often done; and then my father said that he thought it would be proper that I take some professional training because he'd never had any, and he realised that it was a very speculative life in the City; he'd no idea whether or not I wished to go into it, but if I did, he felt that living through the experience of his own life that he would like to have had something he could have fallen back on.  So he encouraged me very strongly to take a professional degree.  I accepted that advice, but I was quite keen to get on to start my life and earn some money, and to my lasting disappointment - in the sense that, if I ever had to live this life over again - I actually turned down the opportunity to go to Oxford, which was very stupid in retrospect; but at the time I wanted to get on with life and so I took his advice and started as a chartered accountant, where I subsequently qualified with Spicer & Pegler.

BA:  Was the decision not to go on to University something that many of your peers were also making?

VP:  No, at the time I think that practically all my peers took advantage of the University education.  Of course at those times, there were only two universities to go to.  You didn't consider going to the red bricks, as it were, in spite of the fact that no doubt they had a magnificent education; it was either Oxford or Cambridge or you didn't bother.  So they all basically went to Oxford and Cambridge.

BA:  Did you have any feeling when you decided to take the accountancy qualification that you would in a dim way, end up in the City as a career, or you really still had your options open?

VP:  No, I absolutely had my options open.  I would say that my father never pressurised me to go into the Stock Exchange.  I think he wanted me to go into the Stock Exchange but he never made it any pressure whatsoever.  I became an accountant entirely with a view to all possible avenues in commercial life being open to one.

BA:  And how long did you pursue your career as an accountant?

VP:  I qualified.  It took me four years because in those days you either went to University and did it in three years University foundation course plus three years post-graduate degree course, or you went and did the straight course ex-University from zero to full qualification in five years.  As it turned out the rules changed and I managed to achieve the latter course in four years.  So I was well ahead of my contemporaries who'd been to University, and at the ripe old age of 22 I was fully qualified whilst my University contemporaries were still struggling to get through Part I.  I also got married at the same time at the age of 22, so the commercial pressure to earn a living was very strongly on me.

BA:  How had you met your wife?

VP:  I'd met her as an acquaintance, playing cricket, I think, originally, but we didn't see very much of each other the first year or so I knew of her.  It wasn't until later on we started to date more formally, and then we got married really quite quickly, I might say entirely against the wishes of my father who thought that I should be fully qualified and able to look after her before I should contemplate such a step; one of the few times in which I crossed his judgement and like to think that I did it correctly.

BA:  Did her family have any City connections?

VP:  Yes, funnily enough, her maternal grandfather went bust on the Stock Exchange, before the War, as a broker, and so she was extremely dubious about people with City connections.  Her father was a parson, and her mother was clearly a lady who'd enjoyed the good things of life, as it were, but had suffered commercial deprivation, so she was extremely doubtful about the City.  However, they held it not against me.

BA:  So you got married, and you pursued your course as an accountant.  What was the next stage after that?

VP:  Well the next stage after that was I had a number of opportunities open to me. I could have gone into Rank Hovis McDougall, which I was quite keen to do, but I couldn't quite see what I was going to do as a career there.  I could see the first stage but I couldn't see very easily the second.  I was very tempted to go and work in Dorset for Hall & Woodhouse, who were brewers, and I was head-hunted to do that, but the problem was I could never see how I was going to make any capital there because the ownership of the business was firmly in the family hands.  I didn't terribly want to carry on in the profession;  I didn't see myself as a professional person.  And then I think it was just one of those strange timings in one's life, in that my father came to me and said, 'well are you going to come into the City, or are you not?  Because I'm thinking of retiring, but if you were going to come into the City, I would just hang on for a little bit longer to see you established in the firm';  I suppose a very gentle form of paternalism, because by then the firm which he had headed up was clearly being carved out as one of the survivors in the post-War jobbing scene.  I think he was very proud of it and would have liked me to have come in, and would have been prepared to have worked on a bit longer to see me established.  That was an extremely generous send-off in a sense.  I'm afraid it didn't do him any good in the longer term.  I think he probably worked longer than he should have done and he ended up by dying still as a working partner.  I think he would have enjoyed at least four or five years of retirement.  But I don't know that he would have been any happier, so at the end of the day you don't know entirely.  He died a satisfied man, I'm sure.

BA:  And so you decided to join the firm?

VP:  I decided to join the firm, yes.  The other side of it was that I wasn't getting on very well where I was working within Spicers, and I just think something happened and I turned to my father and said, 'Right, I'm prepared to give it a go'.  I think he was pleased and I came into the family business.  And what was quite salutary was that having become a qualified accountant with two years' experience and taking quite a lot of responsibility in the field, I was right down at the bottom of the pack again.  I found that extremely difficult to handle, because commercially one knew a lot more than one's peers; one was much more, well, one was qualified, professionally.  He was quite good in that he didn't insist that I went back to lick to stamps and make the tea, but you had to earn the respect of your fellow work-force, particularly if you were your father's son; because they were prepared to accept you, but only on the basis that you were as good as they were.  So you had to go back and start a new business from afresh.  And it was quite hard to do, I would say.  I think I was pretty arrogant, actually.

BA:  How would you describe the firm when you joined it?

VP:  Well, it was clearly a firm who had, because of its leadership and the strong partners that had been drawn around it post the War, most of whom were extremely close friends of my father's ... And the partnership was really at its essence, the best possible commercial arrangement between people.  They were great friends.  They understood and trusted each other implicitly.  They knew enough of what each other was up to to know that they couldn't lead each other commercially into the essence of a partnership, which was unlimited liability.  You could always have a break on your fellow partners' affairs, but you knew them intimately enough to ensure that they couldn't lead you into such troubles.  I think there was a great wisdom in the old Partnership Act which said that you couldn't have a partnership of more than 20 people, unless it was a banking partnership.  The moment they scrapped that rule it really destroyed, in my view, one of the functions of partnership.  You couldn't possibly know what sixty partners were up to.  And it was never, really, the same, ever again.

BA:  You said that Pinchin was clearly being carved out as one of the firms that was going to survive or grow.  What made it distinctive in that sense? How is it that your father pursued this particular policy whereas other firms were quite prepared to coast and eventually when the time came, to become extinct?

VP:  I think that my father, the emperor, Esmond Durlacher, who was probably the forerunner of them all, was the most far-sighted of all of them, and Hugh Merriman, were the three people who realised that the jobbing business, to cope with the clientele, would have to get into bigger units and to have bigger capital, better organisation behind them.  One has to remember that when these people came back from the War, they arrived at a very fragmented market.  There was really very little industry other than the main armaments industries and the great firms who had got us through the War.  Of course the major joint stock companies were quoted companies.  There was still a tremendous amount of private industry in private hands.  Private individuals, by and large, owned in large amounts great controlling interests.  The Institutions were, in a sense, just starting.  Of course, the major insurance companies, banks, pension funds and so forth, were beginning, but they didn't have anything like the investment domination that they began to get very quickly after the War.  Inflation was relatively low, taxation was relatively low after the War.  There was no Capital Gains tax, for instance.  I think they realised very quickly, as politics became to dominate the scene, that taxation as it grew, inflation  as it grew, as the cult of the equity became an investment necessity - the cult of the equity, which I believe was the province of Ross Goobey of the Imperial Tobacco pension fund, together with, certainly one of the people who claims to have it,  Geoffrey Beale, of Grieveson Grant, who had the original theory of equity investment as a massive protection against inflation in investment terms.  It was very new stuff.  It was regarded as entirely speculative to invest in such things.  I can remember for a long long time, with inflation creeping up in those times, that the return on Gilts lagged way behind the return on equities to reflect the risk, a concept which now seems simply absurd, but [not] in those times after the War.  I don't think that anybody would claim to have had original thought about it, but it began to become obvious to the brokers, who talked very closely with their jobbing counterparts in the City, and the advice that they were giving, that this had to be the proper way of protection; that fixed interest securities couldn't possibly be, and the Gilt Market couldn't possibly be, a proper method of investment.  And gradually that concept was given to the bigger institutions who took it on board and they began to become much more powerful and much more demanding in terms of equities; therefore you could see that they were becoming the owners of the businesses.  From the other side, of course, as taxation and estate duty, as it was in those days, became more and more punitive, individuals were beginning to sell their stock and gradually it was getting into the hands of the institutions.  And the people who understood that shift in commercial ownership were people like my father and Esmond and Hugh Merriman.  It was obviously discussed with broking counterparts, the senior partners; but they realised very quickly that if this was the new market, then jobbing firms in order to handle the business which was going to come at them would have to adapt themselves, would have to be very well-capitalised ...

Tape 1 side 2

BA:  You were saying firms would have to adapt themselves and be well-capitalised?

VP:  Yes, they'd have to be very well-capitalised to cope with the commercial pressures that the clients would put upon them.  As a result of that no doubt, a lot of mergers went on in the industrial jobbing market during the period from 1950 onwards, and it was clear that there would be five or six winners at the end of the day.  And Wedd Jefferson as they were then, Durlacher Mordaunt, Bone Oldham and Seal, C. D. Pinchin & Co., Akroyd & Smithers, Bisgood Bishop, Smith Brothers as they were then, were all firms who were beginning to make mergers and acquisitions across markets and build up their capital.

BA:  Can you describe how your father set about adapting the firm to the new post-War conditions?

VP: Well I think that one of the things that he did was to bring organisation to it.  Of course, essentially the business of a jobber was an individual business, that he as a principal stood with his book on the floor of the Exchange, and as the Charter of the Stock Exchange was written, their clients were simply the brokers, very similar to Lloyds in many ways; that the brokers went out into the world to bring the business to the market, in return for which the market never tried to go out into the world to compete for business; a very clean simple approach to life.  The brokers went out into the world, brought back the business, and the world in essence in those days was essentially the UK.  There were strong overseas markets such as the gold market, prior to the War the American market, the Australian market and although they had exchange controls and peculiarities according to their own, nevertheless a substantial amount of that business was brought back to the London market, to be transacted and handled by the jobbers there.  And so the jobbers had a tremendous personal relationship with the brokers with whom they dealt.  You had to do that in order to be entrusted with the business that you were given, or that you wished to take on, because if somebody chose to do you wrong, as it were, you could become financially very upset as a result of it.  So it was a tremendous mutual trust.  Of course the clients had to have their business done properly but at the same time you had to trust the agent who was bringing that business to the market, that it was properly bought and there were no difficulties about it and it was perfectly clean.  You didn't obviously make money out every transaction, but you had to know there was no crookedness or anything going on at the backhand, and therefore you had to trust your brokers.

BA:  Did your father pursue a similar policy of merger to that pursued by people like Esmond Durlacher and Hugh Merriman. 

VP:  Yes, yes, he did.  His first merger I would have said was with a small firm in the industrial market and then there were several firms in the rubber market.  Then I think the first big merger was with Messrs. Ferguson and Clark, which was actually the moment that I came into the business.  They were in the financial markets.  And after that there were mergers with Murton & Adams in the paper market and the last big merger that they undertook was with Denny Brothers in the investment trust market.

BA:  How did these mergers come about?

VP:  Mainly by personal contact between senior partners.  There were clearly only four or five people who were at that stage in the business of bringing the major jobbing units together, and it was a question of how the individuals got on with the other senior partners and how they thought their staff and their employees would be looked after.  So it became very much a personal performance.  Equally one has to say that you tried to keep it in markets.  I mean you didn't start stepping outside into something you didn't know about unless there was a very good reason for it.  I would say probably Wedd Durlacher were the most adventurous in the sense that they really took anything on.  I think we stuck rather more rigidly to markets which we felt we knew about.  

BA:  Did your father know people like Hugh Merriman and Esmond Durlacher personally?

VP:  Very much.

BA:  Did they discuss the jobbing system writ large together?

VP:  Oh yes, yes, very much so, and although they were fiercely competitive with each other, and their staff were fiercely competitive with each other, I think it would be fair to say that at the top level there was a very good understanding.  Maybe in retrospect that's more apparent than real, but I would say it was honourable competition and you could always speak to your opposition.  It was a very fine way of doing business.

BA:  Well, let's return to your career.  When exactly was it that you joined Pinchin?

VP:  I think it was in 1966 that I joined Pinchin.

BA:  And you said you found it quite hard being back down at the bottom again.  What exactly were your first jobs in the firm?

VP:  One of the first things I had to do was to go and buy peppermints for the partner who was running the pitch to whom I was allocated.  I simply couldn't stand it and after about a month of this I turned round to him one day and said, 'If you want any peppermints you can bloody well go and buy them yourself'.

BA:  And what was his response to that?'

VP:  His response to that was to take me outside and give me the biggest dressing down.  He said unless I toed the line and behaved myself he personally didn't see there was any future for me in the firm whatsoever.  My father never entered into the argument whatsoever.  He just left me to sort it out.  And I have to say that we came to a good understanding, that I didn't go and get his peppermints every day, but I did once a week.

BA:  So were you sent straight onto the floor of the House? 

VP:  Yes, straight onto the floor of the House, as a blue button, a junior trainee, and I was there for probably six to nine months learning the trade.  And looking back on it, humility about buying the senior partner peppermints was one thing but you did make your friends amongst your fellow blue-buttons, not only within the firm but amongst the brokerage.  We used to go out to coffee with each other and some of those people I used to have coffee with when I was 23, 24 are now people who either have been or are still senior partners with broking firms.  Like anything in life you make your friends at that stage.  It was an invaluable experience.  And the Stock Exchange was a great leveller.   If you got a bit too big-headed or cocky, something happened to knock you down, and the personalities inside it were terrifically observant and any idiosyncrasy that you might have had, they used to pick on at once and they'd give you the most immaculate nick-name, which was rude without being offensive.  It just brought home the fact that something you might have been doing which was annoying to your fellow colleagues, was spotted and alighted upon.  A great leveller.  And if you couldn't take it and you couldn't take the sense of humour, then quite honestly, you were better out of it.  I remember many friends who couldn't stomach it.  I think it just sorted you out, either you were made for the market or you were not.  And if you were it was a good life and if you weren't, you'd better go and do something else.

BA:  Do you have any other early impressions and memories of the Stock Exchange?  Of course, you were still in the old house.

VP:  Very much the old house.  There were great characters there.  Again there was a man by the name of Percy Duke who had a very small firm of jobbers, and he was a bully.  He used to take great pleasure in knocking into a blue button and pretending that he'd been running or had barged him, because in those days there was great etiquette about how you behaved on the floor of the Exchange; because it was a physical market with a lot of people on it, and if everybody ran from A to B, you'd have chaos, it couldn't be worked.  So there were strict rules.  But some people used to stick by them, other people would turn a blind eye.  This particular man was a great bully and his business basically was going downhill, so the further it went downhill the more sticky and difficult he became.  And one day - it was at the time of the rebuilding of the Stock Exchange - he knocked into what he took to be a young blue button and gave him a most terrific rocket for running.  And the chap said 'I don't know what you're talking about, guv'.  He said, 'I come from Trollop & Colls, the builders.'  So the laugh was on him. And it was rather sad that at the end of the day that particular firm was taken over by my father's firm and the individual who apparently was at the front of it all, turned out to be not half the man he'd made himself out to be, and at the end he lost his entire capital.  So it was a very sad commentary on just how somebody could put on an air and a grace in the Exchange and his real life was crumbling away behind him.  So you learned a great deal about human relations, a great deal about basic things which drive human beings, which I have to say I still think are fear and greed.  I saw two dramatic examples of fear and greed in my life on the Exchange.  I've never really forgotten them and I don't think that I will ever see more graphic examples.

BA: Would you feel able to describe any of those?

VP:  Well, very briefly, the fear was in 1974, which was probably the most vicious Bear market post-War.  Three of us were summoned to the Chairman's room in the Council of the Exchange.  The Chairman said he'd just received a telephone call from the Chairman of the National Westminster Bank and that he, the Chairman, would like to say that he felt that from the market had come a rumour that the National Westminster Bank was going broke, and that the Chairman had received this call in order to tell us that this was not the case, that the Bank was entirely liquid, could meet any calls that were to be made upon it and would we please go back to the marketplace and make that known.  Now that must be the nearest thing that I shall ever see to being a run on the bank, and as the bank involved was the National Westminster it was clearly no minnow.  And it transpired that indeed one of our dealers had picked up an off-the-cuff comment, had walked into the local branch of the NatWest to cash a cheque, had repeated this comment which he'd heard on the floor of the Exchange, the cashier repeated it to the manager, the manager had repeated it to the senior manager, and it whistled up to the top in no time, hence the telephone call.  But that just showed one how close to fear people had become.

The greed story was really much more basic.  It was at the first post-nationalisation of BP when the shares were offered by the Government to the public, and it was a very hot issue, it had gone extremely well and as a jobber - actually our firm were not jobbers in the stock at the time - but one observed grown men fighting each other to get to the jobber's stand in order to deal for their clients and physically being pushed and kicked and shoved for hour after hour after hour.  It was quite horrible, something I don't really ever wish to contemplate again.

BA:  Well I'd like to return to the '74 recession and the privatisations just a bit later in the context of Pinchin's experience of those particular episodes, but to return back to the early days as a blue button, were you attached to one particular pitch or did you, were you moved from one pitch to the other?

VP:  No I was moved from one pitch to another to get an overall view of what was going on in the firm.  There were markets which were obviously more important to the firm than other markets, but one had to see all sectors of it.  I think my father was one of the first people who decided that fixed interest securities were a market of their own, that although we dealt in the underlying equities of many commercial and industrial firms, that there was a separate market to be made out of the debt which attached to those companies and he set up a fixed interest department.  Now that wasn't a very glamorous side but it was a very good bread and butter earner, and one had to do one's stint on that side, although you didn't necessarily contemplate being a dealer in that particular market.  

BA:  Which were the other markets?

VP:  The other markets we looked after in those days were electricals, steels, before the first nationalisation - no, I think after the first nationalisation and before the second, my memory fails me I'm afraid on that one - engineering, and then as a result of the first mergers, the financial markets of insurance, banking and associated financial companies.  Those were really the markets in which we operated, and so one had a good turn round all those, and in those days there were lots and lots of different companies to deal in and we had a very full book of stocks.

BA:  Which were the more glamorous stocks or the more glamorous books?

VP:  I think the electrical market was the one which my father particularly had singled out and the stocks there were General Electric, AEI, English Electric, Parsons, Rayroe and Co., most of whom I think subsequently merged or have been taken over, and now GEC would account for practically the lot of them.  But in those days there were thriving markets in all those stocks and there was a great living to be had out of them.

BA:  How did you feel after you'd been a blue button a while about the decision to go into the Stock Exchange?

VP:  Well, I think, like anybody, you go into a job and you think this is going to be your last port of call, but I very seriously thought that I would leave it again.  In many ways, having had a professional background it was very difficult to come up with the rough and tumble of the market.  Intellectually one felt on a different level; that's not to say a superior level, but just on a different level.  I found the humour and the give and take of the market something which I couldn't get on with. So many people took commercial decisions by the seat of their pants rather than by any sort of judgemental process.  And essentially that is the essence of a jobber.  You couldn't ask him why he did a deal, he just did a deal because it felt right and it was very hard to actually get that together.  Now my father, again, and his partners: their commercial upbringing was to trust their gut reaction.  You had to have a nose for a market, and that was experience, it was reading the papers, it was all sorts of different things, and people are good at it or they're not good at it, there's no examination which can say whether you're good or bad.  From a professional background it was difficult to accept all that, and I did find that for a while I didn't think I was going to make it.  However I did in the end.  But I would say that I was never a good jobber in the sense that my father and some of his partners were.  They were good gut-feeling jobbers.  They had the ability to make money, run a good book and to look after the business.  I was certainly not in the same league as they were, as far as that was concerned.

BA:  Who were the other important partners in the firm?

VP:  Well my uncle Copper was also very good. He was not as good as a jobber as my father, but he was a very good disciplinarian.  Although, my father, previously in the interview I said he was a very hard man and a disciplinarian, he was basically an expansionist.  If you asked him a question he would always say 'yes' to it.  He wanted to be on the front foot always.  My uncle was very much a more cautious person, and they acted actually as a good pair, because there was always another point of view to a problem that was brought through, and by and large they got on pretty well.  They had their arguments but by and large they got on very well.  And I think it was that combination which was the strength of the firm.  There was also another man called, Bill May, who did a very unusual thing, in that a merger which had gone on between Durlacher and other firms, he didn't like and he didn't want to go.   And he'd always been a great friend of my father's and so he decided to do a splinter group and come and join my father.  Now that was almost unheard of in the Stock Exchange.  It created quite a stir at the time, but they were tremendous personal friends and Bill May was a terrific, tremendous jobber.  He was a great market student, he knew his stocks inside out and [had] a tremendous respect amongst the brokers for the business that he could bring them and the business they could transact through him; a very very powerful personality.  He probably was another one.  The third one was a man by the name of Todd Urling-Clark, whose father had been Chairman of the Stock Exchange.  In fact I believe he was the last jobbing Chairman of the Stock Exchange, and was as such, a complete disaster.  The Exchange resolved never to have jobbers as Chairman again; but I wasn't there to verify those facts.  But Todd himself was a considerable intellectual personality; very lively, very temperamental, but a real expert in the insurance market in particular.  They really ran the five or six major commercial composite companies, with very high price shares like œ60-œ70 a time, quite unlike now, with equanimity and ease, and he was a formidable adversary to come across if you were learning your trade.

BA:  What was the next step for you after being a blue button?

VP: Well, I was made a junior dealer, and I worked again, away from my father's electrical book.  He wouldn't have anything to do with me really.  He passed me round the partners.  I worked for Bill May.  I worked for about a year with him.  

BA:  Which book was he running?

VP:  He was running the television and light electronic stocks at the time.  And I really learned my jobbing business from him.  He was a great pessimist, Bill.  He lived entirely on the basis that everything was going down tomorrow, and so he was a genuine bear jobber.  It says quite a lot that he managed to be so successful in by and large post war, certainly from the fifties to the seventies, in what was entirely an increasing bull market.  But he always ran a cautious book and always ran it on the short side.  A very very judicious user of capital and it was actually the finest way to run the business, for lots of different reasons, into which we may, no doubt, go later, but he was a great teacher of it.  So he taught me really to be a junior dealer, and I did that for a year.  Then promotion became pretty rapid, because clearly at that point I had become accepted within the firm; and although not universally accepted by everybody, I think it was - although I say it myself - assumed that eventually I would progress through the partnership, or into partnership and then through the partnership, perhaps to be a future boss of the firm. And there was no resentment about that, I would say, from my fellow employees; because they recognised that although it was the question of 'boss's son', they rather liked and approved of the idea that provided the boss's son was up to the job, that he should take the lead, provided it didn't mean that their own ambitions would be blunted.  And I think my father was a realistic enough man to realise that his own share, and indeed of the senior partners' equity would have to be watered down to be given to other people.  Although many of these young men had absolutely no capital at all, there was quite a straightforward but harsh formula which allowed them to be partners, essentially borrowing money from the senior partners, and it was repaid out of profits as they were earned; and it was, I think, that knowledge that they wouldn't be penalised, which helped me to be accepted, and I think in the end welcomed, as somebody who perhaps one day might be the senior partner of the firm.

BA:  How did other people come into the firm?

VP:  Oh it was a very broad brush.  We got a lot of people from local secondary schools.  I think people had a great view of the City as being the blue-blooded battalions, and people with public school and University education would come in and take on their fathers' footsteps, and so it would carry on for ever and ever.  To some extent, and I'm a case in point, that was so.  But it was terrifically broad-minded and independent beyond that, and all firms would accept people from any walk of life.  Provided they put their best foot forward they always got recognition, and I would think there isn't a firm, the most blue-blooded of which you could mention, which doesn't have people who came from the  most humble beginnings.  It wasn't a meritocracy exactly in all firms, but if you were good at your job, you jolly well came through to the top.  I think it's been one of the most obvious misjudgements of the City that it's only the blue bloods that get on.  It simply was not the case - in the Stock Exchange anyway.

BA:  Well, after a year with Bill May as a junior dealer, what was the next step for you?

VP:  I then became, very quickly after that, invited to join the partnership.  I think I became a partner in 1968-9, something of that nature.  I became a junior partner and then I began to take responsibility for the administration.  Because of my professional training I was involved in some of the more specific parts of the business like the taxation of the firm, and so forth, so I had a good grounding in that.  But at the end of the day one's business was dealing in stocks and shares and you couldn't get away from it.  You couldn't afford battalions of administrators and so forth and we had no need for it.  So your business was from 9.30 to 3.30 and then from 3.30 to 5, dealing on the book, the 3.30 to 5  being after hours, and then at 5 o'clock you started your administration and gradually one got involved into the administration as it became more and more heavy.

BA:  Which book were you on?

VP:  I think I really did all of them.  I was on the engineering side, the electrical side.  My father probably in the, I would say, late sixties, had by then given up active dealing, to go onto the Council and a number of other things, so he'd left the actual day to day dealing.  And I took over the electrical side at some point from him, certainly.  But basically I did all the stocks.

BA:  And about how many of you would be running each book?

VP:  The structure of the firm was one principal partner to a pitch, and then probably three or four employees on each pitch and each pitch would represent an industry which would probably have a lead book of the biggest stocks and then two or three secondary books with all the minor and lesser stocks on them.  So I would say we probably had a staff on average, of something like 7-8 people, and we'd have had something like 8-10 pitches, something like that, so we had roughly speaking, 80 dealers, of which you'd have had 15-20 partners.  

BA:  What would a typical day be like for you at this stage, say the late 1960s, early 1970s, still a relatively junior partner.  For example, where were you living at this time?

VP:  I was still living in Hampshire at that time.  Hours had probably become a little more pressing by then and I would be catching a train to leave at 7 o'clock in the morning.  I would be in London, probably at about half past eight, quarter to nine, something of that nature, and I would go to the office to get the day started, as it were, and then we would walk down to the floor of the Exchange at half past nine.  And then we would deal until half past three, until the official hours finished.  Then we would be up in the office from half past three till probably, at the latest, five o'clock, when dealings would cease and the books would be ruled off and the bargains put through in terms of the Stock Exchange settlement system.  Then I would leave and catch the 5.30 home, something like that, but once a week, once a fortnight we'd have a committee meeting.  Then that increasingly became once a week and that became twice a week, and that meeting would last from five until half past six or quarter to seven, in which case I'd probably spent a night in London.

Tape 2, side 1

BA:  How important would the press, for example, be, as a source of information on stocks.  Would reading the papers be an important part of the day.

VP:  Oh, very much so, yes.  I mean you had extremely good relations with the press, obviously part of your information process at the beginning of the day or the weekend was what had the papers said, what was the comment.  But equally the press used to come onto us to find out what interesting things had gone on, and we used to release certain amounts of information. It was probably later than that but certainly Patrick Sergeant had a tremendous market relationship with the major jobbing firms, and I suppose in his day he was one of the most famous financial journalists, almost influential financial journalists, in the popular press and I suspect that he would put down quite a lot of that information to his rapport that he had with the major jobbing firms.

BA:  Where would the journalists get you?  Would they be waiting for you outside the House or would they come into the offices?

VP:  No, they would come into the offices, they would ring you up, they would ring you at home, they would be in many respects close personal friends.  Patrick Hutber and my father were - I keep talking about my father, but simply as I remember him talking - but certainly Bill May, Copper and my father: Patrick Hutber, Kenneth Fleet, Patrick Sergeant, were, off the top of my head, just three journalists who they all cultivated and they cultivated them.   It wasn't a question of giving information for direct gain.  It was a sensible rational discussion of the marketplace, of particular stocks within the market, of topical news and so forth and it helped informed comment.  And from the jobbers' point of view it helped very much; knowing what the press would view about particular stocks or particular markets or the economic situation or politics or so many things, would help them make up their mind about the way the market would be going.  They wouldn't always be right, but it was certainly a very necessary part of the information process.

BA:  Would the brokers use you for information on stocks?

VP:  Yes, certainly. I think we have to define what information you mean.  Certainly brokers at the very beginning (and I'm talking really at the cult of the equity) knew really quite a small amount about the companies in which they dealt.  There was no question about large research departments or economic departments.  Phillips & Drew were probably the first firm who really began to get an organised institutional approach to equities with analysis, company comment and so forth, and then very quickly many firms followed after them.  The great brokers of the day had really introduced their equity business on the basis of bringing the company to the market and I can remember, certainly, although it was before my time in the firm, that there were so many new issues coming, that a broker would come up and say 'What was this company XYZ Limited' and the partner on the book became so fed up with telling him that it was making widgets or distributing oranges or whatever it was, he had printed out a little basic pro forma which stated that the issued capital was so much, that the price of the offer was X, that its main objectives of business were Y, the directors were so forth, and he simply handed it out to them.  This was regarded as such a wonderful innovation that here was this firm of jobbers who actually could give them some information about the company - and they rattled off with it and I suspect on many occasions, posted it to their clients - that it was the first, what was known as an intelligence department, and from that we grew our own little small research department, which of course was very quickly overtaken by the jobbers.  So, yes, in that specific way, did brokers come to the market to ask jobbers about information?  The answer was, yes they did, and we were very happy to give it to them because [it was] the more information that people had.  Insider dealing, if that's what you were getting at by the question: no, people did not reveal innermost secrets; but any market is about information, and I'm not going to say that for a moment that insider information about companies - and you have to be very clear in your definition about what is inside information and what isn't - was clearly about, and that brokers and jobbers would swap information.  Most of which I suspect was well wide of the mark, but it was regarded as inside, and it all meant you had to take notice of it.  You couldn't be apart of it.  But I don't think that for a moment I would ever say that - did brokers come and say to my father or my uncle, or any jobbing firm, 'Do you know about XYZ, is it going to be taken over next week?' - and if it was, well you clearly wouldn't tell him, that was regarded as quite unacceptable, and you'd probably not be in possession of that information.  It wasn't nearly as crude as perhaps some people think.  Nevertheless, I equally think that the resultant damage which was inflicted as a result of perhaps indiscreet information was nothing like as bad as it now is seen to be.

BA:  Why is that, because fewer shares were involved, or smaller sums would be involved?

VP:  I think smaller sums were involved and there was certainly less financial pressure to take advantage of such information.  If you told a partner that you thought something might be going to happen, or he told you that, you definitely did not take advantage of it.  You didn't pile off and tell the Pru or make a fast buck for yourself or do all the other things which apparently now seem to be part of commercial life.

BA:  Do any of the major takeovers of the period figure in your experience.  For example the GEC takeover of AEI in 1967?   You say your father kept you away from the electrical book.

VP:  Well funnily enough, that was a very good example.  I was not allowed on the electrical book at the time, and I do remember that coming up on the screen and there was a hushed silence, unbelievable that this mega-merger could have taken place, and an absolute pandemonium round the jobbers' pitches as people piled in to see what was happening, what the price was and a tremendous turnover developed in the shares thereafter.  Yes, but I wasn't involved in the pitch at the time, but I remember watching it happen.  

VP:  Would an episode like this be quite profitable for a jobbing firm, in that there'd be a lot of turnover in stocks?

VP:  Yes, I think basically it would be.  It might start off on the wrong foot, and that could be quite expensive, but it would generate tremendous turnover.  You would work your way out of the position if it was adverse to start with and then you'd get onto the right foot and then - particularly if the merger was going through at the end of the day - it could be extremely profitable.  Those things were by and large, welcome, but in a sense that they were short-term.  Because if you had a very good stock like GEC and a very good stock like AEI, to lose one, to be left with one bigger stock, the sum of the two parts was never, in the long term, as good as the two parts individually, as it were.

BA:  Do any other takeovers figure in your experience?

VP:  Well, there must have been many takeovers which have occurred during the time, but I don't think anything which I could immediately fasten upon.  They became increasingly more plentiful, rumours of them became - and they either happened or they didn't happen.  And very much, they became a currency of the day.  I think it wasn't until really quite late on in my career that the takeovers of major companies became a threat.   If you took what was considered to be an alpha stock, you could, by and large, guarantee that that would not be taken over and therefore you'd be safe to run a position on the bear tack in it.  It wasn't until probably the eighties when, or late seventies and the eighties, when alpha stocks became targets for major companies.  It would have been inconceivable in my day, in the early days, that companies like Distillers could have been a takeover target.  By the time I'd finished in the Stock Exchange if somebody had said that ICI was a takeover candidate, you couldn't sensibly say that it was not, and I think that certainly made our business very much more difficult as a result of it.

BA:  Do you have any recollections of the effects of a collapse of a firm, for example Rolls Royce in February 1971, either on the firm or on the Stock Exchange generally?

VP:  Yes, those early seventies were extremely interesting times.  Not only were individual firms finding it very difficult.  We did on one day have three hammerings, I don't know whether people listening to this tape will be familiar with a hammering.  It was three blows with a gavel on one of the waiters' desks, which would basically state that the partners of the firm, and they were read out with their full names, were unable to comply with their bargains, and it meant that from that moment either they were out of business and the relationship of the firm vis-a-vis any other Stock Exchange firm was frozen and would have to be unwound.  It was a very chilling moment, because it was always preceded by a certain amount of rumour as to whether or not there was going to be a hammering or whether there wasn't.  It was always very difficult when it happened near settlement day because another firm didn't know whether he'd have his bargains settled and there was always the fear of the domino effect and one thing and another.  One of the features of the post-war period that I was involved in was that the jobbers, by virtue of the fact that they had got themselves well organised, never never allowed another jobber to be hammered.  They always effectively stepped in and took them over.  Now that might have been an arranged rescue with the help of a broker who said, 'look,' to Esmond Durlacher or Hugh Merriman or my father, 'Look, I think that so and so's in trouble, we don't want any problems, do you think you could see your way to taking them over; and very often that was actually how things were done, particularly in the Gilt-edged market, between Akroyd and Wedd; they were very skilful at making sure that the smaller firms were rescued properly, so the integrity of the market was [not] consumed.  In the equity market the same was done, but it was always a little bit more rough and ready.  So the hammerings were always about brokers, that I remember.  But they were very dramatic, extremely uncomfortable and involved a good deal of personal unhappiness and distress at the same time with people losing their jobs.  It's one of the things which does leave a mark.  And even to this day, when I hear people strike a piece of wood in a public place, I just stop and think for a minute about the death knell.  It was rather like the rattle of the guillotine if one's not being too romantic about it.

BA:  Did Pinchin ever suffer through the hammering of a broking firm?

VP:  Yes, temporarily we did, but in the event we always got our money back from them, by and large.

BA:  Could you describe what would happen in those kind of cases, without necessarily going into details of names?

VP:  Well the first news, of course, would come out and it meant that all the bargains stood as they were, and then they were unravelled individually one with another, and then you would be left with balance positions which you would have to either sell in the market or look to recovery.  It took a long time and of course it could seriously embarrass you financially in the intervening period, but I would say that it is remarkable that we never ever lost any worthwhile sum of money through a hammering ever. It was partly, I think, through efficient office administration, but also in the end, most people lived up to their bargains, and the deficiency of capital was probably found from the compensation fund.

BA:  How was Pinchin faring as a firm in the early 70s, let's say, setting aside for the moment the recession in 1974, say coming up to the recession, late sixties, early seventies, was it a profitable business?

VP:  Very, oh yes, a very profitable business.  I can quite definitely say that throughout the period of partnership from 1968 we never ever lost money.  I think we had our overheads under control, we had good turnover in the market, the margins were good.  A great boost to margins [occurred] at the period of decimalisation, when that was introduced.  It did mean a substantial effective increase in margins, because of the decimalisation of the currency being expanded effectively, and just mathematically you expanded your margins by, from memory, about 40-50ÿper cent.  It didn't seem very much in pence at the time, but the effect was extremely good.  Funnily enough the 1970s, on the bear tack were extremely profitable for the jobbers.  It's a technicality of the business but if you sold a bear it meant you required very little capital to run your book with, because you were never buying stock, you were always selling stock to buy it back later.  So provided you could, again, another technicality, borrow the stock and deliver it to your buyers, you never had a need of an overdraft; so we were short of stock and it was going the right way in market terms, we had a considerable balance at the bank in credit, so we were winning on both ways.  And I think that in terms of relative advantage at that moment in time we had it over the brokers hand over fist and probably were as financially powerful as ever at the end of that period of the seventies.  But thereafter, when the market turned and we got back into a bull market with the equities, provided you could keep your inventory right, and I think that's perceived at this day, it was profitable.  There was sufficient turnover.  Of course you got some positions wrong, but by and large we were always long on stock; we had some uncomfortable moments, but by and large we had very good turnover and very good business and it was very profitable.  It wasn't until much later that [we became more aware of] the structural difficulties of the market, and one could see that the commercial problems of the jobbing system, and being a member of it, were going to cause difficulties in the later stages.  But that was much later on.  In those early seventies - well the whole of the seventies - it was a very profitable business.

BA:  Was it about this time that you merged with Denny Brothers?

VP:  Yes, it was in the early seventies, I think, from memory, either 1970 or 71 that we merged with Denny Brothers, and that was the last of the major mergers that we undertook.

BA:  Can you remember how that came about, because I believe Denny Brothers was a firm with more or less the same number of partners; you both had more or less 15 partners in either firm.  Was it a sort of an alliance of equals, or was it again a case of one firm taking over another firm that was beginning to flag?

VP:  Well, I would like to say it was the latter, because I think the senior partners were very much older men, but great experts.  Jack Hubbard and George Wicks were both then in their later sixties, [and] clearly wanted to retire. There was no obvious successor in management for them.  But nevertheless it was an extremely successful firm and George Wicks was without a doubt the most expert man in the investment trust market that probably there will ever be in the Stock Exchange.  He knew it inside out.  And so it did come to us as a very whole, complete, very profitable business, and clearly it was extremely valuable to us to be able to acquire that, and we did so on extremely advantageous terms to the partners of the then Pinchin.  They, equally, had a much broader section of the market to survive upon, but for many years afterwards the profits from the investment trust market in particular were a great strength and stabilisation to our firm's profits.  I think it would have been difficult to imagine them having gone on without having merged with us, and I think as it turned out, it was a very happy merger.

BA:  Did the office have to expand - the back office have to expand?

VP:  No, it was perfectly capable of being carried on within the one, and there I think I should pay tribute to my father in particular who saw from a very early stage that computerisation was absolutely key to streamlining the administration.  In fact we had one of the very first computers in the Exchange, having gone on from the old International Computers and Tabulators, who put in the original Holorith machines into our office  - I think they should be preserved in a glass case - I'm not so sure that they aren't still around, but nevertheless, they did these punch cards which were read and it was a very efficient method of recording all the entries, which were many many hundreds in a day.  In 1970 we were doing something like 10-11,000 bargains a day in the second steel renationalisation - something like 12,000 bargains a day - which when you consider the amount of bargains done by any individual firm now is simply staggering in the volume.  And that went on for week after week after week.  And without computerisation we simply couldn't have coped with the volumes. 

BA:  So about this time, the last major round of mergers was taking place, back office was becoming more sophisticated, you also had the move from the Old House, through the temporary House, to the New House in the early 70s.  Did that make a difference to the Stock Exchange, to the atmosphere, to the way you did business?

VP:  Oh, yes I think it did.  Many of us who were younger partners, who were up in communications, felt that it was all for the good.  I think it certainly took away a lot of the character of the House.  The waiters of the Stock Exchange were a marvellous lot of people, and one looks back with a great deal of nostalgia at their ability,  because they were great trainers of people as well as everything else, and you relied desperately on their good offices to make sure that your firm was promptly called and messages were relayed and delivered.  But it was archaic in the Old House as to how it was done, with the old ear trumpet and the whistle, which blew down a voice pipe from one end of the building to the other, and if the chap was a bit hard of hearing or not paying attention after lunch, you could fail to get through for a long time.  There was no question of a walkie-talkie on the floor and all this sort of thing.  Of course it was more efficient - the new House - of course it was, and it had to happen, but it lacked the charm of the old.

BA:  Do you remember any of the waiters?

VP:  Yes, absolutely.  Not many of them are alive now, I don't think, but I certainly saw one the other day; he would be now nearly eighty, and he was a terrific friend of the firm, and he looked very well.

BA:  How did the firm weather the recession in 1974?  I imagine that if you were doing a lot of - if one of your main markets was insurance trusts, financial markets, that these would have been stocks that were particularly vulnerable to that kind of recession?

VP:  Well, really the main enemy of the industrial market, if you want to put it like that, during the seventies and eighties was inflation; because I think the manufacturing industry found it extremely difficult to adjust their commercial attitude to roaring inflation.  They simply didn't realise it was happening, that their costings and replacement in terms of changing the direction of the business, in terms of replacement of capital and so forth was very difficult to account for and price in their businesses.  And financial businesses were much more able to keep abreast of inflation and price themselves out of any problems they got onto, and of course they had no fixed price contracts like constructors and builders and so forth.  So something like the Rolls Royce crisis, which was basically caused out of, I suspect, fixed price contracts being entered into and being unhorsed by the rates of inflation which eventually took over, simply didn't occur in the financial markets.  Therefore the markets in which we were dealing in that aspect were much more in demand, they were really bull markets and there were people, brokers, who were seriously advising their clients to, for instance, sell the motor market and the components market in its entirety and reinvest in the financial markets.  And of course it was a very good investment switch.

BA:  So in terms of the running of the business or jobbing, it wasn't a particularly harsh time for Pinchin Denny?

VP:  No, certainly not, no.  We did well.

BA:  Now when did you become senior partner?

VP:  My father died in 1972, my uncle carried on until 1976, I would say, until he himself became really quite ill, and so although I was not senior partner until 1978, in name I was senior partner from 1976 onwards.

BA:  And what did that entail for you in terms of your role in the firm?

VP:  My role in the firm: it meant that I completely left the dealing side altogether, and as at the time I was late thirties, beginning the forties, it was quite hard to actually be kicked upstairs on an administrative role.  Because by then jobbing firms had become much more structured, in terms of organisation and committees and so forth; it had taken on a bureaucracy in order to cope with the difficulties of running a modern commercial business.  And so it was with great sadness that I really began to lose touch with the market from then onwards.

BA:  And did you try and pursue particular policies in terms of the particular development of the firm?

VP:  Yes, very much so, because during the 70s, although we'd prospered quite well, one of the great features was that under the Socialist Government of that time, inflation really rushing away into hideous proportions, and the funding of the Government debt with interest rates rising with tremendous result, the turnover in the equity markets had dwindled in terms of the total turnover of the Stock Exchange, in favour of the Gilt market, enormously.  I think that if I was to criticise my predecessors - and my father in particular - I would say that they didn't see that happening.  They were given the opportunity to enter the Gilt Market in the early seventies and they decided that they wouldn't do it.  We were doing very well at the time, they didn't want to extend themselves; they didn't really understand the fixed interest market; the Government broker clearly saw a need for another jobber in the Gilt Market and felt that our firm would be the appropriate people to come and ask; clearly it would have helped us in terms of personnel and showing us the market.  But we turned it down.  And in retrospect it was a very bad mistake, because in those seventies we missed out on a colossal volume and a turnover which really promoted two of our competitors, namely, Messrs. Wedd Durlacher and Akroyd & Smithers, really almost head and shoulders from the rest of the market at that time, with the tremendous amount of profitability and turnover that they derived in the Gilt-Edged Market.  It was a bad mistake, and it was something that I attempted to put right, because in 1978 we felt that we had got to a point where we really had to have a representation in this market, and having researched it really very thoroughly, we did enter the Gilt Market.  And although we were very small operators in it, we did actually have that representation, and it stood us well in the end.  We did make a success of it and made a certain amount of money out of it.

BA:  Did you ever consider incorporating?

VP:  No, incorporation was really, again, as I remember, a feature of the early 70s.  My father had a very strong view that he wanted to remain a partnership.  And I think earlier in the interview I talked about the tremendously strong affinity that there had been between partners, that it was an ideal form of commercial relationship, particularly in a business like jobbing, where you really could lay your colleagues on the line financially if you opened your mouth in the wrong way, or you'd been commercially imprudent.  And it was a tremendous discipline and a great comfort to know that you could work on such a basis.  So my father had always felt that in order to encourage young people into the business, partnership was ideal, because you could admit them with no capital, they didn't have to buy their shareholding from somebody else.  So anybody with any ability but no capital could come into the business, provided he could be financed by his other partners.  One other great advantage of partnership was that the rules of cessation, under the Income Tax Act was such that if your business suffered, or was prone to peaks and troughs in absolute profits from one year to another, you could so arrange your tax affairs to take advantage of that; and without going into any great detail, it was possible for partnerships to, as it were, cease and commence their business advantageously taxwise, which was not a cheat, in terms of avoiding tax.  It was a legitimate measure.  But the money so saved from tax, without one shadow of doubt, contributed hugely to the ability of the jobbing system to remain in business.  Without the professional advice to work that the jobbing system would have crashed to the ground a great deal earlier.  Now, with those two points in mind, my father had been very against ever selling the business out.  I think the first firm to sell itself were Smith Brothers, and they took a perfectly ....

Tape 2 side 2

VP:  I was saying that the proprietors of the business were trying to cash in on the value of their businesses.  Both Smith Brothers, and Akroyd Smithers shortly afterwards, and then subsequently after that, Bisgood Bishop, took that view, and did so.  My father, for some reason or other, felt that that was not right, the philosophy he held was that he was lucky enough to be asked into partnership, for which he'd paid nothing; that the great thing in life that he could do was to pass on to people the same opportunity that he had.  Therefore he had this rather curiously puritan streak in him, which he managed to persuade, not all, but the majority of his fellow partners that they too should not sell out, as it were, to the public, and that they should keep the thing private.  And it did work very well; there was a great view as to what was the stronger.  I have to say that at the end of the day, I think that those companies who incorporated were better able to withstand the latter part of the eighties than were the partnerships, but it would have taken the imagination and the wisdom of a considerable man at that stage in the early eighties to have said that he was wrong; and certainly I, for one, benefited from the attitude that my father and his partners decided to adopt.  So we decided not to go, for right or wrong, the incorporated route.  And for a long while it looked as if that was a very good commercial decision.  

BA: You referred earlier on to the structural difficulties in the jobbing system. Was this something you were becoming aware of as you became a senior partner and you were taking a view on, or was it something that had been evident for a considerable time?

VP:  No, I think it was something which had been evident for a considerable time and it became apparent actually in a market in which we were not particularly active, which was the overseas markets. Smith Brothers, in particular, and the Gold Market, had found that with the advent of exchange control and the dollar premium, that the market in the Kaffirs in London had really gone away to United States and to Switzerland.  In other words it was by-passing the London market, and America at that stage was just beginning to find that investment in overseas stocks was something that they as brokers and a financial centre in New York, should be getting involved in.  We were not at all involved in the overseas markets.  Smith Brothers, as I say, were very considerably involved; Wedd and later Akroyd themselves were.  And I think it was this area of the business which led to the beginnings of the breakdown between the jobbing and the broking businesses.  As I said at some stage in the interview that the unwritten rule was that the brokers went outside into the world, they got hold of the business, they brought it back to the London market to transact.  Well, clearly it was much more difficult to transact in the London market with exchange control, the dollar premium and so forth.  And therefore during the period of the seventies, many brokers had gone out into the world, found the business, but had transacted, not back in London, but in other, overseas markets.  Now that immediately put a strain on the concept of the broker and the jobber who should mutually respect each others' patches.  Another aspect of it, but perhaps not so obvious at the time, was that taxation being so much lower overseas, there was certainly a temptation for business to be transacted and profits retained in overseas centres where there were very much lower rates of tax.  And I have in mind particularly Hong Kong.  So, bit by bit it became obvious that there was a difference of approach to the way that the business should be transacted.  That, of course, meant that those jobbers who felt that their business was being threatened, tried to get in on the act and tried to establish themselves overseas.  And this led bit by bit to considerable friction.  I think if the interested historian were to read the Stock Exchange Council minutes of the eighties, one of the most fundamental differences of opinion which kept coming up again and again was 'where were the rules of dealing in overseas shares to be drawn?'  I think really that was fundamentally the beginnings of the strains between the jobbers and the brokers.  And once, of course, it became obvious that business could be transacted in New York as easily in American shares or in Kaffirs, as it could be in London, it became a very short stop for business in UK shares to be transacted in New York as easily; and with the Americans who were very quick to find any innovative rule, the creation of ADRs, American Depository Receipts in UK shares in New York - which meant effectively that there was as good a market in Glaxo or ICI as there was in London - it began again to mean that the protection of the domestic market was coming to an end.  And the reasons for that were that ownership was spreading; it was not confined to the UK, particularly in the 80s with the Conservative Government, with the investment community looking with more favour upon sterling as a currency; with the freedom of people to invest in the UK, and outside the UK with exchange controls all torn away; with market barriers coming down;  with the better economic performance of the UK; with much better communications; with tremendously strong brokerage houses in New York, in Tokyo; with London attracting these people to do business in the United Kingdom; it became obvious that a jobbing system requiring artificial barriers to keep it alive in a sense, would at one point have to go.  I've rationalised it in retrospect, but these events became more and more apparent as they went through, and although conceptually in UK domestic stocks it would have been perfectly possible to have carried on, I think that both the jobbers and the brokers realised that from a business point of view, this barrier would not stand up.  Now that's not to say that I don't think that Big Bang couldn't have been achieved in another and perhaps better way, but it was fundamentally, I think, one of the reasons which meant that the jobbing system, as we knew it, would have to stop.

BA:  Were these issues that you, as partners in Pinchin, were talking about?

VP:  Oh, yes, most definitely, because at the bottom line, whereas I can say in the 1970s the brokers had quite a tough time of it, with falling turnover, falling market, and the jobbers had rather a good time of it; as the roles reversed through the seventies, with the markets picking up, particularly with the tremendous business in the Gilt-Edged Market, really it became the turn of the Gilt Market to dominate -  so equities on the whole didn't do quite so well. That was for both brokers and jobbers.  And then as we came through the period of the first years of Thatcherism and the equity began to take over again from the Gilt-Edged, so the institutional equity brokers began to do extremely well at the expense of the equity jobbers.  But by then, of course, most of the big firms were well represented across all the camps, so they had an interest in all the pies.  But I think I could say that during the eighties the brokers prospered enormously at the expense of the jobbers.  They got their business done for a fixed commission at a very satisfactory turn.  They managed to acquire people of ability as opposed to the jobbers; I think, by and large, the better brains went into the broking business.  It was eloquent that I think we were the only initiative to start up in a new market; there were no possibility of new firms of jobbers starting whereas there were one or two new brokers being started up.  It was quite clear that the commercial writing was very much in favour of the brokers.

BA:  Did this create tensions between jobbers and brokers?

VP:  Oh yes, yes and a lot of very emotional words were struck, especially on the question of overseas business and who should be doing what and who was cheating.  Brokers who were dealing in ADRs were accused of taking principal positions and really acting as jobbers.  It was very very tough and not a very attractive time.

BA:  How did the brokers feel about jobbers?  I mean what did they think about them, did they regard them as necessary evils, or is that overstating it?

VP:  Well, I think those senior partners didn't regard them as necessary evils.  They regarded them as very necessary for the doing of their business.  I would say at the other end of the scale, that the young Turks who were manning the sales desk did regard the jobbers as necessary evils.  It was a very attractive proposition if you had a large line of stock ... And here, you see, the rules had not kept up with commercial practice. If you were in the market buying 14ÿper cent of Consolidated Goldfields, that was not a transaction which was remotely designed to be coped with with rules which had been installed for a much smaller market place.  So, of course, as a broker, you were tremendously keen to make sure you did that business at minimum commission rates, and it was a tremendous money spinner; and of course if you had that business you tended to rather want to do it at all times and not consult the market, or to get the market involved as little as you had to.  Now in such an operation as buying 14 per cent of Goldfields, of course you had to get the market involved because you couldn't have done your business, but there were many occasions where a broker might have had a £1,000,000 order which he wanted to match and if he could avoid coming to the market until the very last moment, he would have done so in order to safeguard the commissions.  And, in a sense, every piece of business which went through like that was the jobber's loss; he could never get hold of that stock and make a market with it; he just saw it pass through his book, because the rules said so.  It was regarded as an irritant by the brokers, as an extra cost by the client, and as an extremely large opportunity lost by the jobbers, so it became very difficult...

BA:  Was this something you would take up with senior partners in broking firms?

VP:  Very much so, but of course they had businesses to run.  They regarded it as a legitimate part of their business and that they were not going to give it up.  A few of the more senior brokers did see it and realised that they were taking away the very livelihood which they depended upon, because of course if the put through couldn't be done, where could the client have his stock dealt in?  It would have to come back to the jobber.  So they of course realised at the end of the day that they had to keep us in business.  But it was a very fine line and we seemed to be losing it and most interestingly there were certainly two or three committees of senior partners who sat at the Stock Exchange, particularly addressing the overseas question, but all the pressures of the jobbing system eventually came in front of them, and we pooled all our figures through an independent accountant, so that they could be studied objectively, and it was quite clear you could see that in the good years the expenses were inexorably rising and the profits would be going up, but that the gap between the expenses and profits was narrower than it had been, and in the bad years it was looking horribly as if the profit line was going to come and hit the straight line of increasing expenses.  And so the writing was on the wall, as to the commercial future of the jobbers.

BA:  It's been said that the jobbing firms were undercapitalised to cope with the kind of investing environment created by the dominance of the institutions.  Was that a problem as far as Pinchin was concerned?

VP: I don't think I can ever remember, perhaps up until right at the very end, that we ever turned down a proposition on simply that the order was too big for the available capital.  Having said that the risk-reward on individual propositions was becoming ludicrous; and therefore, the question of the capital available was one thing - the question was, was it a commercially sensible decision to take to take on the business.  So I can't give you a straight answer, I think.  But nevertheless the trend was, the business which the institutions were presenting to the market was becoming too big for the, after all, four or five jobbers that were left, to be able to take on; and I think eventually it would have been too big.  Having said that I'm not sure that we're any better off now under Big Bang, but that's maybe another story.

BA:  What was your view as a senior Partner on things like joint books or minimum spreads?

VP:  As far as joint books are concerned, we didn't have any.  I regarded them as anti-competitive and not something which could be maintained.  They had to be registered.  I think we might have had one or two.  From that point of view we did try to maintain as competitive a market as possible, and as far as I remember there was not a stock in which we dealt in which we either had a joint book on which there was not a competitive jobber. As far as spreads are concerned, again I didn't really approve of them, because I don't think they really helped, although they did preserve a basic margin as a start-off.  And therefore to that extent they were helpful. But what it encouraged people to do was to use the spread, but you just created a bigger and bigger price round it.  So instead of the spread being 1 1/2ÿper cent and being quoted in a size of 100,000 sterling, it was still 1 1/2 per cent in half a million sterling, so the institutions probably got a better deal out of it.  The little man didn't get, necessarily, a better deal.  And I don't think it particularly helped the particular jobbers.  It cut both ways that one.  The minimum tended to become the maximum at the same time.  There was not enough flexibility and I personally didn't like minimum price spreads, because I think it operated against our own margins.  But they were very difficult to break down and I think it would be fair to say that it was a protective measure which was adopted almost universally throughout the market at the end.

BA:  By the end, Pinchin was one of the bigger jobbing firms, certainly not the same scale as Wedd or Akroyd, but in the top five.  How did you get on as the principal jobbing firms in the Stock Exchange?  Did you discuss issues of mutual concern or interest with each other?  Or did you tend to go your own ways?

VP:  I would have said we tended to discuss and have quite regular meetings of senior partners, particularly on issues like overseas stocks, price spreads, anti-competitive measures; because the OFT at that stage were beginning to take an interest in our affairs and in order to preserve the status quo the Stock Exchange Council encouraged us to be able to give a common view on many matters which affected the public interest and the monopoly interest.  So really at the end, although the competition at book to book level was as strong as ever, and very competitive, the relationship between the senior partners was extremely good.  I don't think there were any major disagreements which weren't thought through and discussed rationally and if at the end of the day we couldn't agree, well we couldn't agree, but it was not done on any form of bad terms.  And I think it was probably helpful to the market.

BA: What was the feeling in Pinchin Denny in 1983 when Sir Nicholas Goodison came to his agreement with Cecil Parkinson over the future of the Stock Exchange?

VP:  I think it was probably mixed, really.  I mean clearly people felt that there would be a chance for us to sell our business, so that they were pleased with that.  But on the other hand I think they realised that the world would never be quite the same again, and so it was tinged with a certain sadness, that inevitably bit by bit, events would unfold, nobody quite knew how, but they would unfold and that we'd had our best times.  So I think it was viewed with very much mixed feelings, really.

BA: If we can start winding up, how would you contrast the jobbing system as you'd experienced it, perhaps in the 70s, early 80s, with the kind of jobbing system that your father would have known when he first went into the Stock Exchange? - if it's possible to answer that question.

VP:  Well I think the shape of the market was entirely different.  When my father first came into the Stock Exchange you had a very public market.  And I think that the jobbing system was devised for exactly those circumstances, in that there would be a lot of individual investors, who would wish to make individual decisions through their brokers as to what they were to do.  No individual or no series of individuals could ever really dominate either a market  - they might be able to dominate a particular stock for a short time - but they couldn't dominate a market for any length of time.  So freedom of information, freedom of access in a physical market place, given that there was ... One has to remember in his days the telegraph had just started and that the person in the American market who had the greatest advantage was the person who had the telegraph system attached to his own office and was regarded as very commercially off-side for the rest of his competitors, because he actually knew the price in New York.  Those were the circumstances in which he was dealing in those days and it was very appropriate.  The business could be handled easily, the prices were not that volatile, the size of business which they could handle with their capital was perfectly possible, overheads were quite low, taxation was low, inflation was reasonably low, they didn't have to make huge profits in order to exist and they had a very comfortable lifestyle, commensurate with the risks that they were taking.  Now no business situation can remain static, and a variety of one or other of those things changed during the ensuing thirty years, and one has to say at the end of the day that they all conspired to work against the sort of system for which it was designed.  And maybe the sin of my generation and my father's generation was that we were never able to adapt the rules to make sure that it lasted, or that the good parts of the jobbing system managed to last and sustain the period of change which the seventies and the eighties brought with it.  A part of that you couldn't have helped, because it was involved with Governmental policy of inflation, taxation and so forth, but I can't help feeling that Big Bang, whereas it was an answer, it wasn't the right answer and that maybe we should have gone to the Courts to listen to the solution that the Judiciary would have put forward.  I am sure it would not have perpetuated the jobbing system, but I don't think that it would have demanded that it should have been closed down and abolished in favour of the new world which appeared in 1986, which I do not think, necessarily, for institutions and private individuals, but particularly for private individuals, has been a satisfactory answer.

BA:  What would you say it took to be a successful jobber, perhaps thinking of your father or people like Bill May who you said was a great bear jobber?

VP:  Well it took great judgement and great bravery to be constant in your view.  I've always heard it said that the best jobber changes his mind every five minutes; now I don't believe that that was actually right. Of course you're not always going to be right, and you can't be dogmatic, but you had to have a consistency of view to hold out against.  And I think that the truly great jobbers were able to do that, to hold their position and to see it through correctly, so that they maximised the advantage that they put up.  To that extent to be a really successful bear jobber was a tremendous skill which is not given to modern market makers, for many reasons - one of which is to do with ownership. Because if you do have a prepared position on the bear tack as a jobber, you have to have a reasonable expectancy of being able to close it.  Now if you have tremendously dominated institutional shareholdings, of course at the end of the day they don't have to sell - they may wish to but they don't have to, whereas almost certainly private individuals will have to sell, if nothing else if they die; and of course with the question of takeovers and predators, again, any bear position became tremendously difficult to hold.  But that one quality of being able to hold your position, see it through until you really had maximised your return on the position, was a tremendously important judgement and very very few jobbers had it.

BA:  Can you recall any examples in your experience?

VP:  I can recall one, yes, where a bear position was held in a company called Rolls Razor, and the jobber involved was absolutely convinced that this company was hype stock, that it was rubbish and that it would in the end go bust.  He took the position up much too early and he took it out and just held it there, and he saw it go up and up and he kept writing the stock up, writing the stock up.  There was always a lot of turnover so he had a continual revenue in order to write the position up.  And he just kept it and kept it and kept it.  And at the end of the day, the balloon went bust and the stock collapsed from whatever it was to zero and he collected the whole lot back again.  A wonderful example, but you had to have tremendously strong nerves to do it and I think that that skill is irreplaceable now.  It will be something that will never happen again.

BA:  Would you advise any of your children to go into the City?

VP:  Oh, yes, I think so.  It's a different place now.  People learn to make their own fun and to make their own relationships and I think that any feature of a marketplace is exactly that.  I think if it becomes an electronic marketplace it's perhaps more difficult to establish it, but nevertheless you do have to have personal and physical contact to make the marketplace work.  After all it is the people behind the machines at the end who count, and to have a rapport that you can go and explain your problems to other people and work them out will always be a feature. And I think that with it comes the personal, human side, which makes it a lot of fun.  And if you want to earn a lot of money, I believe always the dealing of financial instruments will provide an income which is greater than you can get doing other jobs.  Now whether in the sum of human achievement it's any more worthwhile or less worthwhile I couldn't begin to judge.  I think probably it isn't more worthwhile, but that's not the way the world works.  It's also quite short term, and I think probably even more short term now.  My father would never have retired before 65, I've retired at 50.  I suspect that my children, if they went into the City, are rather like professional footballers, they'll be finished at the age of 35 or 40 and go and do something else.  I think that's the way you've got to look at the Stock Exchange.  But I certainly wouldn't advise somebody not to go in, provided you take it for what it is, and don't try and pretend that you're anything that you aren't.  You're simply part of a marketplace and you have a very short rising and waning of the sun.

BA:  I think we'll finish on that.  Thank you very much.

VP:  Thank you.