The cover of this engaging study of Edinburgh’s financial sector displays the distinctive star-clad domed ceiling design of the Royal Bank of Scotland’s Dundas House premises on St Andrew Square. It is a suitably double-edged metaphor for the Scottish lender that grew to astronomical size with a balance sheet bigger than UK GDP, but which famously needed a sky-high bailout after a run of decisions seeking at-any-cost growth with scant regard for the consequences.
RBS, its calamitous fall from grace and its lesser-known origins, serves, along with fellow historic pioneer and eventual calamity Bank of Scotland, as the key protagonist of this forensically researched work by financial journalist Ray Perman.
He notes that the Darien disaster of 1700, a failed attempt to create a Scottish colony in Panama, bankrupted Scotland and drove it into union with England, spawning the institutions that saw Edinburgh become a global financial centre.
These included Bank of Scotland –Scotland’s first bank of its kind and one of the first in the UK – which would eventually find itself teetering on the brink after merging with Halifax to create HBOS.
He notes how Edinburgh’s financial activities helped foster the development and economic prosperity of the city and Scotland more broadly – with aristocratics such as the Duke of Buccleuch playing a key role – while its reach grew to span the globe.
It is also apparent that the sector acts very much as a mirror for an evolving society, such as the slow decline of “gentlemanly capitalism” – moving away from a time when you could give your word as your bond. Perman is also quick to point out the gender imbalance and eventual steps to gradually reduce this. But fans of the maxim that those who fail to learn from history are doomed to repeat it will find vindication in the peaks and troughs of RBS and Bank of Scotland – whose troubles in the recent financial crisis were far from their first.
The author also touches on insurance, investment management, and stockbroking, examining the stories of well-kent names Scottish Widows, Ivory & Sime, Standard Life and Aberdeen Asset Management.
Perman asserts that Edinburgh’s banking sector has become a shadow of its former self – with much control having been handed over to London, RBS and Bank of Scotland contribute less to the life of the city, while the financial crisis killed Scotland’s reputation for frugality and caution.
But he also notes that the financial services sector remains a major employer. And there are green shoots of growth – the technological advances that fostered the sector’s development, such as the installation of the electrical telegraph on Bank of Scotland’s offices on the Mound, continue with its burgeoning fintech scene, while there are plans to bring back a Scottish stock exchange for the first time since the early 1970s.
Perman also brings to life key personalities such as William Wotherspoon, who, for the first two years of its existence, ran Scottish Widows from his home.
Sir Walter Scott’s varying fortunes also play a pertinent role. Indeed, he noted: “In his own personal affairs the Scotsman is remarked as cautious, frugal, and prudent in an extreme degree… but when a number of the natives of Scotland associate for any speculative project, it would seem their natural caution becomes thawed and dissolved by the union of their joint hopes.” Emma Newlands
The Rise And Fall of The City of Money: A Financial History of Edinburgh, by Ray Perman, Birlinn, 418pp, £25