Cor­byn is an eco­nomic ju­ve­nile, says City vet­eran

The billionaire founder of Icap tells Ben Mar­low he is still in the mar­ket for help with his next deal

The Sunday Telegraph - Money & Business - - Front page - By Ben Mar­low

BROKING billionaire Michael Spencer has launched an at­tack on the Labour Party, la­belling Jeremy Cor­byn “an eco­nomic ju­ve­nile” and ac­cus­ing the op­po­si­tion leader of “nasty pol­i­tics”.

The boss of trad­ing gi­ant Nex said Labour’s crit­i­cism of the City and busi­ness had cre­ated “a shrill en­vi­ron­ment” in which busi­ness lead­ers are afraid to speak up for the pri­vate sec­tor.

In an ex­clu­sive in­ter­view with The

Sun­day Telegraph just weeks af­ter his com­pany was sold to the Chicago Mer­can­tile Ex­change, Spencer also pledged to take up the man­tle of Bri­tain’s cheer­leader for en­ter­prise.

“It is a nasty type of pol­i­tics that tries to tell every­body that the small group of peo­ple ‘over there’ are mak­ing every­one’s lives a mis­ery. That’s b---ks. Yes, there are some bad peo­ple but there are in the priest­hood, in pol­i­tics, but it’s a small mi­nor­ity,” he said.

He added he felt able to speak out be­cause, de­spite be­ing one of the UK’S wealth­i­est in­di­vid­u­als, he had started his busi­ness from scratch. The for­mer Tory party treasurer is now nearly £900m bet­ter off af­ter of­fload­ing his Icap broking em­pire in two parts. It was founded with just £50,000 in 1986.

“I used my own money so I don’t see my­self as an over­paid salary man and I have stayed in the UK pay­ing taxes,” he said.

Spencer called on the Gov­ern­ment to stand up for free mar­kets as it pre­pares for Brexit. “It needs to make the pro-busi­ness case … to re­mind peo­ple that this fall in un­em­ploy­ment is not down to the state sec­tor, it’s the pri­vate sec­tor.” Cor­byn “doesn’t un­der­stand busi­ness and com­merce,” he said.

This week, Nex is ex­pected to raise ap­prox­i­mately £3m for char­ity, the 26th year that Spencer has do­nated a day’s rev­enues to good causes. It has be­come the best-known fundrais­ing event in the Square Mile, rais­ing a to­tal of £140m. “It is a proper demon­stra­tion that we are not all greedy sods,” Spencer said. This year it will be fronted by Bob Geldof and Si­mon Le Bon.

Within sec­onds of bound­ing into the room, it is clear that Michael Spencer has lost none of the verve that has char­ac­terised one of the City’s most colour­ful ca­reers. The billionaire founder of broking gi­ant Icap is sup­posed to be lay­ing out his plans for the fu­ture, as he pre­pares to step down from a busi­ness that he built from scratch over more than three decades.

It was as­sumed he would con­tinue to ex­pand his broking em­pire well into old age, even when it was split into two pieces last year. At 63 years of age, Spencer still fizzes with en­ergy and, af­ter sell­ing the tra­di­tional Icap phone broking op­er­a­tion, he pledged to re­build us­ing the re­main­ing elec­tronic broking op­er­a­tions, re­named Nex. How­ever, a bumper takeover of­fer from the Chicago Mer­can­tile Ex­change proved too good to turn down even for a worka­holic like Spencer.

The sud­den change of plans marks the end of a re­mark­able era in the Square Mile. Still, talk of “what next” will have to wait. As he plonks his large frame down in a chair, Spencer is keen to re­flect on what is a fairly ex­tra­or­di­nary legacy. With barely a pause for breath, he dives straight into the his­tory of how he cre­ated one of the UK’S first gen­uine fin­tech busi­nesses.

“It was 1986 – just be­fore the Big Bang. This was a time when there was no reg­u­la­tion, no cap­i­tal needed, all you needed was a cou­ple of clients, a cou­ple of phones, and a screen, and away you go.”

Spencer makes it all sound easy but he spied an op­por­tu­nity in the nascent in­ter­est rate swaps mar­ket that few oth­ers could see and de­cided to set out alone. A head for num­bers, honed as a physics un­der­grad­u­ate at Ox­ford, helped.

“I knew the maths pretty well … so I could quickly work out … how you could … make a lot of money.”

Flush with £200,000 from the float of his then em­ployer, a broking firm called Charles Ful­ton, Spencer bought an apart­ment for him and his wife with cash. With the re­main­ing £50,000, he struck out alone with three col­leagues.

“My fa­ther was a civil ser­vant who I loved dearly but I al­ways wished we had a fam­ily busi­ness so I thought ‘b-----ks, you know what, I’m go­ing to set up a busi­ness’. I went to the guys on the desk and said ‘We are go­ing to set up a busi­ness’. They said ‘we’re in’.”

To­gether, they re­signed on April Fool’s Day. “We had one month’s no­tice and I wanted to start a busi­ness on May 1, be­cause some­how I felt that was por­ten­tous.

“There were 23 other broking firms around. We were the small­est and the newest so peo­ple thought we had no chance of sur­vival. We were four peo­ple broking in­ter­est rate swaps, every­one else was broking de­posits, for­eign ex­change, for­ward FX, bonds.”

Spencer leaps up to grab a framed picture of a 20-year re­u­nion that was held out­side the of­fices where it all be­gan in Fins­bury Cir­cus, in the heart of the City. Many of them still work with him to­day. Those that don’t, he is still in close con­tact with.

“We couldn’t have got our tim­ing bet­ter. The mar­ket was on a dra­matic growth tra­jec­tory. We were one of the very few firms in the City that re­ally spe­cialised and un­der­stood what we were do­ing.”

The firm was de­ter­mined to stand out, re­ly­ing on clever mar­ket­ing tac­tics to cre­ate a buzz.

“Lots of small things that you do in broking make a big dif­fer­ence in the long run,” he says.

It was the first to launch a real-time screen that dis­played live prices.

“Every­one said ‘Oh, what’s the point in putting your price up on the screen?’ I said ‘If every­one sees our screen, they will think we are the big­gest in the mar­ket and speak to us and we will get more or­ders’.”

The busi­ness was orig­i­nally called In­ter­cap­i­tal but it didn’t fit on the screen so Icap was quickly born.

Spencer and his team were among the first to em­ploy fe­male bro­kers. In a testos­terone-fu­elled in­dus­try where deals were reg­u­larly struck over boozy lunches and a firm hand­shake, it was a move that caused a stir.

“I said, ‘Guys … the client base might be pre­dom­i­nantly male but some of those men might like talk­ing to smart women’. The other firms thought that all the mar­ket­ing was done down the bar and by spend­ing a lot of money on lunch.”

While some of the in­dus­try’s most il­lus­tri­ous names strug­gled to sur­vive, and the newer ones lacked the heft to com­pete, Spencer’s up­start firm blazed a trail to the top. He quickly turned deal­maker, gob­bling up Exco in 1998 in a re­verse takeover. It was on the verge of go­ing bust but the deal would pro­pel Icap on to the public mar­kets, so he took a gam­ble.

“It was in a mess. We shed 600 jobs. We got rid of the com­pen­sa­tion struc­ture, trimmed it down, got rid of ex­cess bag­gage and sud­denly we had a proper mid-sized busi­ness.”

The big prize was ac­cess to the lu­cra­tive US mar­ket. A year later, with Icap’s share price flying, it swal­lowed the Amer­i­can arm of Gar­bane. The deal ruf­fled feath­ers in New York.

“Our lit­tle Icap busi­ness had gone to the races. I flew over to see the three Amer­i­cans that ran it af­ter we had done the deal and they were all like ‘Oh gawd, so you Brits are you go­ing to send over a Brit to run it?’,” he says in a fake Amer­i­can ac­cent.

Spencer let the ex­ist­ing man­age­ment re­main in charge on the con­di­tion that they kept him in the loop and ran all ma­jor de­ci­sions such as staff hir­ing by him. In the broking world, the re­wards for the top tal­ent can be eye-wa­ter­ing.

“I was con­cerned about guar­an­teed bonuses. ‘Oh, you’ve just hired Fred Smith but f--- me, you’ve given him half a mil­lion bucks guar­an­teed bonus. Well that’s not your call guys’,” he says.

With his cut-glass ac­cent and board­ing school back­ground, Spencer isn’t your typ­i­cal City bro­ker. It is an un­so­phis­ti­cated, scrappy world of brash blokes from the home coun­ties scream­ing and swear­ing or­ders down the phones from 7am to teatime. The hard-drink­ing bar­row boys of the in­ter­deal­ers who act as mid­dle­men in trades be­tween banks gorge on pie and mash, and guz­zle Bollinger.

Spencer is more likely to be found sip­ping a fine red wine from his ex­ten­sive pri­vate cel­lar. Rare paint­ings by Vet­tri­ano, Lowry, and Pi­casso adorn the walls of Nex’s of­fices on Broadgate Cir­cle. He has a house in Kens­ing­ton, an­other in Hamp­shire, and two in Kenya. The Spencers love horse rac­ing. He hosts friends in a pri­vate box at As­cot, and owns two race­horses in Kenya – Free Wheeler, which won the Nairobi Derby last month, and White Light­ning – with wife Sarah.

But he is just as com­fort­able in the bear pit of the trad­ing floor, fre­quently mim­ick­ing the ac­cents of the Es­sex lads who rule the City’s broking rooms. Though charming and witty, Spencer is an im­pos­ing fig­ure. Broad-shoul­dered and six feet tall, his tem­per is leg­endary among col­leagues and ri­vals. It is hard to imag­ine the posh boy be­ing pushed around by less cul­ti­vated col­leagues.

“I joined the stock mar­ket in 1976. Thatcher wasn’t prime min­is­ter, Cal­laghan was. We had ex­change con­trols. The coun­try was quite so­cial­ist but I loved the stock mar­ket.”

By 2000, Icap was the big­gest broking firm in the world. In 2006, just eight years af­ter buy­ing Exco, it gate­crashed the FTSE 100. At the com­pany’s peak, it had 63 of­fices around the world – which Spencer says was too many – and 5,000 staff.

None of that would have been pos­si­ble if Spencer hadn’t been quick to spot the tech­no­log­i­cal ad­vances that would even­tu­ally force deals to be con­ducted elec­tron­i­cally in­stead of over the phone, he in­sists. Icap bought Bro­kertec, an Amer­i­can elec­tronic trad­ing sys­tem that con­trolled nearly half of the vast US Trea­sury bond mar­ket, in 2002, and EBS, the world’s largest for­eign ex­change trad­ing plat­form, in 2006.

“It was ob­vi­ous to me that tech­nol­ogy meant that any very liq­uid mar­ket­places were go­ing to go elec­tronic. Peo­ple said: ‘But the com­put­ers won’t buy the clients lunch; tech plat­forms don’t tell jokes; I know Fred­die at Com­merzbank, he’s my mate, he’s go­ing to deal with me’. I said ‘He might be your mate but the com­puter is a damn sight cheaper and will work 24 hours a day. It doesn’t make er­rors or go out for lunch’.”

Yet it is the next tech­nol­ogy race that con­vinced him to sell. When Icap was bro­ken up in 2016, Spencer talked ex­cit­edly about creating an­other FTSE 100 com­pany with Nex. He even set him­self a goal of break­ing into the blue-chip in­dex within five years. Eigh­teen months later, he agreed to a £3.8bn takeover by the CME. What prompted the sud­den change of heart?

“The value of fin­tech as­sets shot away. Every busi­ness that we looked at we couldn’t af­ford. So sud­denly we thought that what we had done with Icap couldn’t re­peat. That was a big light go­ing on.” Is this an ad­mis­sion of sur­ren­der from one of the Square Mile’s tough­est char­ac­ters?

“No! I want to be on the win­ning side. If you’re go­ing to do that you’d bet­ter ally your­self with a pow­er­ful army. I don’t want to end my ca­reer on a los­ing bat­tle. We can still do it but it will be done as part of a much big­ger busi­ness.”

Any sug­ges­tion he is about to take it easy is roundly dis­missed. Spencer has be­come a vo­cal pro­po­nent of UK fi­nan­cial ser­vices, but most busi­ness fig­ures are afraid to speak up for a sec­tor still tainted by a se­ries of post-fi­nan­cial cri­sis mis­de­meanours.

Not Spencer. An un­abashed free-mar­ke­teer, he is frus­trated at the cur­rent level of anti-busi­ness sen­ti­ment, as well as the Gov­ern­ment’s re­luc­tance to pro­mote the sec­tor in the Brexit ne­go­ti­a­tions.

“We live in a very shrill en­vi­ron­ment and the view from some corners is ‘you would say that be­cause you’re all in it for your­selves and you’re paid vast sums of money’ but I think I have one ad­van­tage – I started my busi­ness with my own money and built it from scratch so I don’t see my­self as an over­paid salary man and I have stayed in the UK pay­ing taxes.”

“I will re­main vo­cal in re­mind­ing peo­ple that the City is a con­sid­er­able force for good. Every­one as­sumes that the City is greedy or they’re crooks but that’s b-----ks. Yes there are some bad peo­ple but there are in the priest­hood, in the med­i­cal pro­fes­sion, in pol­i­tics, but it’s a small mi­nor­ity.”

His proud­est achieve­ment is the char­ity day Icap started 25 years ago when staff come to work in fancy dress, and a day’s rev­enues are do­nated to good causes. Backed by mem­bers of the Royal fam­ily and celebri­ties in­clud­ing Cheryl Cole and Ron­nie Cor­bett over the years, it is the best-known fundrais­ing event in the Square Mile and has raised a whop­ping £140m since in­cep­tion. This week it is ex­pected to gen­er­ate an­other £3m in its new in­car­na­tion as Nex Giv­ing Day. “It is a proper demon­stra­tion to the Bri­tish public that we are not all greedy sods,” Spencer says.

Spencer is now fab­u­lously wealthy. The sale of the Icap broking busi­ness net­ted him £200m. Of­fload­ing his 17pc stake in Nex earned him an­other £660m. He plans to be­come a ma­jor backer of fledg­ling fi­nan­cial tech­nol­ogy busi­nesses. Will he be look­ing for young Michael Spencers?

“I hope to find more tal­ented peo­ple! I’m not go­ing to dis­ap­pear to the beach and I’m cer­tainly not go­ing to live in Monaco.”

‘I started my busi­ness with my money and built it from scratch so I don’t see my­self as an over­paid salary man’

Michael Spencer ac­com­pa­nies singer Cheryl Cole at an Icap char­ity day. The fundrais­ing fix­ture has raised £140m since its in­cep­tion

Michael Spencer is happy to beat the drum for the City. Top left, the Duke and Duchess of Cam­bridge at one of Icap’s char­ity days; and, be­low, Sira House, one of his homes in Kenya

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