The phrase Big Bang, used in reference to the sudden deregulation of financial markets, was coined to describe measures, including abolition of fixed commission charges and of the distinction between stockjobbers and stockbrokers on the London Stock Exchange and change from open-outcry to electronic, screen-based trading, enacted by the United Kingdom government in 1986. The day the London Stock Exchange's rules changed, 27 October 1986, was dubbed the "Big Bang" because of the increase in market activity expected from an aggregation of measures designed to precipitate a complete alteration in the structure of the market.
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In the UK, Big Bang became one of the cornerstones of the Thatcher government's reform programme. Prior to these reforms, the once-dominant financial institutions of the City of London were failing to compete with foreign banking. While London was still a global centre of finance, it had been surpassed by New York, and was in danger of falling still further behind.
Thatcher's government claimed that the two problems behind the decline of London banking were overregulation and the dominance of elitist old boy networks and that the solution lay in the free market doctrines of unfettered competition and meritocracy.
The effects of Big Bang were dramatic, with London's place as a financial capital decisively strengthened, to the point where it is arguably the world's most important financial centre even to the present day. An economic boom created a new class of nouveau riche that has persisted for two decades, and the boom expanded beyond the City into new developments in the Isle of Dogs area, particularly that of Canary Wharf. Deregulation stimulated financial innovation and enabled new entrants to provide services.
Some critics have charged that the deregulation, and the atmosphere that it created, were responsible for such scandals as the Barings collapse, although others argue the opposite, that the failure to disestablish the old boys' networks completely was to blame.
In May 2011, The Guardian's economic editor, Larry Elliot, wrote: "There is a simple reason why output is still 4% below its peak and growing only slowly: the debt-driven model of economic growth deployed in the 25 years from the financial deregulation of the 1980s to the bank run at Northern Rock no longer delivers."[1]
Subsequent similar actions, such as the deregulation of the Japanese financial markets in 2001, have analogously also been tagged with the phrase Big Bang.
FT, staff (2006-10-29). "Revolution hailed but City warned of a looming fight for supremacy". In depth > Big Bang (Financial Times). http://www.ft.com/indepth/bigbang. Retrieved 2006-10-29.
Fortson, Danny (2006-10-29). "The day Big Bang blasted the old boys into oblivion (broken link)". The Independent. http://news.independent.co.uk/business/analysis_and_features/article1938279.ece. Retrieved 2006-10-29.
Treanor, Jill (2006-10-27). "Revolution hailed but City warned of a looming fight for supremacy". The Guardian. http://business.guardian.co.uk/story/0,,1932560,00.html. Retrieved 2006-10-29.