What it really means when bankers go casual

As Goldman Sachs’s dress code gets a make-under, Ben Wright explains why going casual can be a sign of an economy in peril

Investors are always looking out for early warning signals that the economy is about to go pop and the markets are about to tank. Well, here’s a slightly unconventional but strangely reliable indicator that we are reaching the top of the market and a correction or crash could be coming: when bankers start dressing down, sell everything.

On Tuesday, David Solomon, Goldman Sachs’s new chief executive (and part-time DJ – yes, really), sent out a memo on the Wall Street bank’s new “firmwide dress code”. He said that, given the “changing nature of workplaces”, he was “generally in favour of a more casual environment” and that the bank was therefore moving to a more “flexible dress code”.

My first thought on reading this news was: oh no, here we go again.

As the Telegraph’s Business Editor, I know that everything in the financial world moves in cycles. If you were to track an index of casualness in City and Wall Street dress codes it would almost certainly mirror the rise and fall of stock market booms and busts. Whether it’s causation or correlation, I don’t know. But as market conditions improve, bankers lose the tie, loosen another shirt button, swap lace-ups for loafers and then, in a burst of irrational exuberance as the markets are soaring, shout: “Roll out the chinos.”

By my count, it’s happened at least three times. For decades, bankers in the City of London dressed like George Banks, the father in Mary Poppins

– sober suit, white shirt, tie, black lace-ups. Then came the Big Bang in 1986, a process of deregulation that opened up the previously staid UK financial system and the Americans dressed like Gordon Gekko – slicked back hair, big watches, braces, shirts with contrasting, but not detachable, collars and the ultimate outrage, brown shoes. The Wall Street banks invaded, the stock markets started ticking up and the profits and bonuses rolled in. Then came the junk bond crisis in the US and a number of emerging market blow-ups at the end of the Eighties and Nineties, putting the lid back on and injecting sobriety into City wardrobes.

Until, that is, the dotcom bubble started inflating. Now investment bankers had to woo swashbuckling, young internet entrepreneurs who wouldn’t be seen dead in a suit. To prove that they were down with the kids and should definitely be the one to help float their vastly overvalued company on the stock exchange, bankers started dressing casually.

Unfortunately, most bankers’ idea of downtime is a round of golf, so their version of casual was a questionable combination of pleated chinos and ill-fitting polo shirts. Thankfully, the tech entrepreneurs were geeky dropouts who could barely dress themselves either. So, just as it seemed like the system might drown in a sea of khaki, the bubble burst.

Bankers went back to chasing for business from boring companies in boring industries, like manufacturing, and had to dress like adults once more. Sartorial and financial sanity returned to the Square Mile and Canary Wharf. But in the City memories are short, optimism is boundless and dress codes are always aching to break free.

Bank regulations were watered down again, politicians wanted everyone to own a home, financial products proliferated and the new cool kids on the block were hedge fund managers with a penchant for blazers, jeans or Bermuda shorts and flip flops. Definitely not suits. Bankers fell into the trap of wanting to fit in, dress codes were relaxed and hey presto: the markets collapsed, nearly taking down the whole Western capitalist system and civilisation as we know it, too. Double-pleated chinos and tasselled loafers have a lot to answer for.

Financial crises tend to come around every 10 years. It’s been nearly 11 since Lehman Brothers went bust. Markets have enjoyed a record run. And now Goldman Sachs is telling staff to dress casually. My advice? Short Havaianas and Gap; go long on Savile Row.