ABSTRACT
Since the early 1970s the UK financial system has been undergoing an exceptionally rapid development, with the more fundamental changes in structure coming since 1980. It has often been argued that financial innovation in any particular country is driven by the broader forces of economic development both within that country and throughout the world as a whole. Clearly, whilst this proposition would appear to be intuitively reasonable, it might also be suggested that the basic trends of economic development are themselves strongly influenced by activities within the financial system. It is evident that the efficient and effective channelling of funds to those individuals and companies able to make the best use of them in respect of productive capital investment undoubtedly helps to shape the pattern of evolution of industrial and commercial activities within the economy. Furthermore, the pace of financial innovation in the UK in recent years cannot be explained simply by the concurrent real economic growth, either domestically or in the Western world as a whole. It is probable that the recent high level of adjustment in the structure of the UK financial system is partly due to the removal of official and unofficial controls and restrictions which had tended to store up pressures for change. It may be argued that, had these controls and restrictions not been403 operational, the pressures for change might not have been generated which have had such marked effects on the financial system in recent years. Certainly, there is no evident justification for the view that in the absence of the now defunct controls and restrictions the financial system would have arrived at the same destination by a different, less spectacular route.
