The City switched to electronic trading 20 years ago this week, helping London become one of the world's busiest financial centres, writes Jill Treanor

Twenty years ago this week Britain was facing groundbreaking change. The Australian soap Neighbours stormed the television screens, the BBC launched its One O'Clock News programme - and the City of London was rocked by "Big Bang".

Electronic trading systems were switched on and the secluded cabal of privately- owned firms that dominated City share dealing was smashed. The old-fashioned way of dealing, head-to-head on a sweaty trading floor, was halted overnight.

As a result of the seismic changes brought in by Cecil Parkinson and Sir Nicholas Goodison, respectively the then trade secretary and chairman of the London Stock Exchange (LSE), major United States and international banks raced to gain a foothold in the City to take advantage of the liberalised markets - helping to turn London into one of the world's busiest financial centres.

At an anniversary celebration in the City this week, the lord mayor of London, David Brewer, said that "without Big Bang, the City is very unlikely to have achieved today's prominent position".

The reality for the men - and it was largely men - working in the City at the time was that their working days got longer and their employers, often partnerships, were taken over by non-British firms. Before Big Bang, the market opened at 9.30am and closed mid-afternoon, with long lunches in between. Now, companies begin making their business announcements at 7am and stop at about 6.30pm.

Foreign firms were unheard of back then. The 300 member firms of the LSE were all domestic.

By the following year, 75 were foreign-owned, while today, about 65 per cent of the City's workforce is paid by overseas employers.

Terry Smith, another speaker at the anniversary celebration, believes Big Bang was about more than simply share trading.

"It turned London into the world's biggest capital markets for foreign exchange, bonds and derivatives as a direct consequence of the greater professionalism and influx of more staff," says Smith, who was then head of the financials desk at the now defunct BZW.

"People don't get in late and don't go out for boozy lunches [ any more] . . . But instant data and dealing do not necessarily equal better investment decisions. The world's best investor, Warren Buffett, prides himself on never looking at a screen," says Smith, who is now chief executive of Collins Stewart Tullett brokers.

Even so, technology has speeded up the process of buying and selling shares. In the past, it could take 20 minutes. A broker would telephone a jobber on the stock exchange floor who would go into the pit to get a quote. Now, it takes seconds at a computer screen. As a result, the amount of share trading has increased 15 fold, while trading in derivatives, largely on London's Liffe market, is up 59-fold.

The UK now depends on financial services for its income. In 1986, it exported £2 billion (€2.98 billion) of financial services. By last year, this had risen to £23 billion. Added to the UK's net surplus on investment income, this pays for the most of the national deficit on trade in goods.

"People often ask me if it's a good thing for the UK now to be dependent on financial services in the same way as it depended on shipyards and steel plants in Victorian times," says Douglas McWilliams, of the Centre for Economics and Business Research.

"Economists can get into deep water if we start to try to suggest that one form of economic activity is intrinsically superior to another form. But there is one important difference.

"At the time of Big Bang, manufacturing industry employed five million people and even today employs three million. The City supports the country's overseas account with only 330,000 direct employees."

This reality fosters the inequality between those in the City and those outside, to whom the salaries and bonuses in the financial world are attainable only by a lottery win. But McWilliams argues that, without the City, everyone in Britain would be worse off. Leading financial figures believe the industry should be encouraged to thrive, but warn of the challenge to ensure that London does not, like the manufacturing industry, find its position eroded by lower cost and fast-growing Asian economies.

Michael Snyder, chairman of the policy and resources committee of the City of London council, says Britain must focus on three main threats: tax, regulation and infrastructure. "International businesses are very mobile. They don't have to have their main domicile in the UK," he says, referring to HSBC's recent comments about the possibility of moving its base due to taxes.

On regulation, he believes Britain needs to stand firm against the creep of EU directives; and on infrastructure, the City needs the proposed Crossrail link through London.

Twenty years on from Big Bang, the LSE is itself up for grabs - facing a possible takeover bid by the US high-tech market Nasdaq. Few will argue that this matters, provided the regulatory regime is unaltered.