By Andrew Staniforth
Within moments of the terrorist attacks in London on the morning of 7 July 2005, news of the unfolding crisis on public transport had reached traders in the City. The London Stock Exchange index, the FTSE 100, lost 3.5% of its total value within just 90 minutes of the trading session that day as a direct result of the bombings – equivalent to a total de-capitalisation of around £44,000,000,000. This immediate economic impact is staggering in and of itself, especially when you consider it only cost the British home-grown Al Qaeda terrorist cell £1,000 to finance their attack.
In the immediate aftermath of the 7/7 coordinated bombings, financial investors concentrated their sales orders on shares related to the tourist sector, fearful of travellers opting to cancel their stay in London. However, and even though the large airlines and tour operators, such as Lufthansa, gave their customers the option of cancelling or postponing their trips to London, there was no significant number of cancellations. The London Stock Exchange recovered its losses very quickly and by the close of trading on 7 July they had been restored. This was a remarkable achievement, serving to limit the potential impact of the home-made bombs that were detonated earlier that day.
The swift recovery from the potential economic losses during 7/7 had been pre-planned; the terrorist response in the City of London had not been left to chance. There were three important factors that were instrumental in restoring trading confidence in London so swiftly. The first was the British Government’s suggestion to the London Stock Exchange to suspend electronic trading in order to avoid a ‘deluge of orders’. This immediate counter-measure undoubtedly contributed to reducing losses, although the stock exchange operators had to face the almost impossible task of processing all orders by telephone.
The second factor which proved essential in restoring trading confidence in London was directly related to the impact of the attacks on the London’s infrastructure which was considered slight when compared to the catastrophic terrorist attacks in the United States of 9/11. In New York, many of the companies in the World Trade Center sustained huge losses, personal and financial. Canto Fitzgerald, whose footprint spanned the 101st to the 105th floor of the North Tower, lost 658 employees in the attack. The impact of losing such an influential trader and investor alongside others such as Morgan Stanley, the Atlantic Bank of New York, Bank of America, Fuji Bank, Lehman Brothers and Ashai Bank in New York itself, who represented just some of the financial institutions operating in the Twin Towers, served to exasperate the economic repercussions of Al Qaeda’s attack. The impact upon the New York Stock Market was devastating. Altogether, the United States Stock Market posted losses in terms of de-capitalisation of the Dow Jones Industrial and NASDAQ of $1.7 billion.
The third factor which proved instrumental in restoring trading confidence in London was that in the wake of 9/11, most financial institutions headquartered in London had developed ‘emergency evacuation plans’ which would enable them to transfer their business within a very short time-frame from central City of London locations to premises outside the urban area. These crisis contingencies provided confidence to investors and traders of business continuity; it appeared that the learning from 9/11 by government and financial security experts had served to minimise the economic impact of 7/7.
The economic repercussions of terrorist attacks reveals the short, medium, and long term consequences of terrorism. The sheer size, scale and scope of the economic impact of terrorism provides evidence to support the notion that terrorism in itself needs to be distinguished from other types of criminality, as it reaches far beyond the human, social and economic impact of other crimes. First and foremost terrorism is a crime, a crime which has serious consequences and one which requires to be distinguished from other types of crime, but a crime nonetheless. Terrorism seeks to undermine state legitimacy, freedom and democracy, the very fabric of our collective community values in Britain. These are a very different set of motivations and outcomes when compared against other types of crime. This is the reason why tackling terrorism is different to countering other types of criminality and why it requires a dedicated and determined approach to prevent it.
As the UK begins to observe the green shoots of economic recovery, we can be thankful to those in authority who quietly and patiently counter the threat to keep our communities and economic interests safe. A major terrorist event specifically targeted towards creating economic instability in the UK committed during the recent period of our financial vulnerability could have had a substantial impact – a catastrophic attack from which we may not have recovered so quickly with far-reaching economic repercussions. That being said, all in authority are required to note that the threat from terrorism remains substantial and complacency based upon the absence of a major terrorist attack remains misplaced and unwise.
Andrew Staniforth is Senior Research Fellow at the Centre of Excellence for Terrorism, Resilience, Intelligence and Organised Crime Research (CENTRIC). He is the author of Preventing Terrorism and Violent Extremism, part of the Blackstone’s Practical Policing series.