HAMISH MCRAE: We want extra Schroders right here in UK not much less

End of an era? There’s a temptation to see the sale of Schroders to a subsidiary of a New York teachers’ pension fund as the sad final chapter to a story lasting more than two centuries.

Johann Heinrich Schroder, born in Hamburg, came to London and founded the asset manager in 1804 during the Napoleonic Wars.

Schroders was one of a string of what we used to call merchant banks, started in the City by the scions of Continental families from the early 1700s onwards.

They included the Barings, the Hambros, the Kleinworts and the Rothschilds, through to Sir Siegmund Warburg, who founded SG Warburg in 1946. With a few exceptions they were all from mainland Europe, and this country owes them an enormous debt.

They built London’s financial services industry into what is still the second-largest in the world after New York. Indeed on some measures it remains ahead. Now only Rothschild is independent. There are UK-owned boutique financial advisory businesses and some important home-based asset managers, of which the most important is probably Legal & General. Our clearing banks, notably Barclays and HSBC, do some investment banking, but this hugely important branch of global finance is dominated by the US.

Back in the 1980s, it was Kleinwort that led the privatisation of British Telecom, then the largest public stock market flotation of a company’s equity in the world. Those days are long gone.

End of an era: Schroders was one of a string of what we used to call merchant banks, started in the City by the scions of Continental families

Does it matter? Well, the decline of equity culture in the UK certainly matters. To have Britons’ pension savings stuffed into gilts – Government debt – instead of growing our firms has been a disaster. This was largely the result of stupid regulation and tax policy by the Labour government of Tony Blair and Gordon Brown. At last that is being recognised.

The narrower point of whether it is troubling that we have ceded investment banking to US financial groups is less clear cut.

Until the Big Bang reforms of 1986, the City operated to a different set of rules to the rest of the world and especially the US.

Then, in a flash, the restrictions – including fixed share trading commissions and a ban on foreign ownership of UK stockbrokers – were blown away. We switched to the US system, so it is unsurprising this element of our domestic financial business would end up being US-controlled.

In one sense it was a triumph. It gave a huge boost to the City, securing its role as the world’s second biggest financial centre.

People who work in financial services get paid here. We can buy shares in JPMorgan Chase or Goldman Sachs and get the dividends and capital growth.

We can to some extent rely on US clout to ensure European regulators don’t damage the City’s business, though it’s self-interest rather than anything else that drives that. But we would be naive to think the big decisions are not made in New York. In the case of Schroders, the investment banking side of the business was sold to Citigroup in 2000, but it hung on to asset management. Now that has gone too.

You can understand why a rich family wants to diversify its wealth. You don’t want to have too many eggs in one basket. But it is troubling that a London-based enterprise with more than $1 trillion (£750 billion) under management feels it hasn’t got the scale to remain competitive.

That leads to a further issue. Selling out is one thing. But we need to ask ourselves why so many UK businesses are undervalued, and accordingly are being snapped up by foreign buyers.

We also need to look at where the next generation of entrepreneurs or rainmakers – be they from the UK, Continent, or North America – are basing themselves.

We’re not doing badly in start-up terms, third behind the US and China, and bigger than France and Germany put together. But we could do so much better. We have lots of ambitious people who can raise the money to get going, but when they need to scale up the cash is in America.

We need the modern equivalent of Johann Heinrich Schroder not only to start here but to build businesses that will last into the 22nd Century and beyond.