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
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