The Baltic Exchange Bombing
The IRA bombing of the Baltic Exchange might have seemed to the owners of the Exchange to be the end. In fact, it turned out to be the very platform from which the Exchange could reinvent itself and swap excess debt for cash in hand.
The Baltic Exchange is currently located on the 5th floor of 77 Leadenhall Street in the City of London. It takes a lease from WeWork, which lets out flexible workspace across several floors.
Before its move to Leadenhall Street The Baltic Exchange was located at 24–28 St Mary Axe. It operated there from 1903 until the IRA bombing on 10th April 1992, the day after John Major's Conservative Government was re-elected.
24-28 St Mary Axe was a multi-story, Grade II* listed Edwardian building with a large central exchange hall topped off with a glass dome. Thousands of shipbrokers, cargo owners, and charterers came together every day, and to the untrained eye they were standing, wearing suits and talking in pairs and small groups. To the initiated, this was open-outcry' floor trading. Behind them were administrative personnel and staff running the dining rooms and the services for members.
The Baltic Exchange now operates with a team of a few dozen people.
This downsizing was driven first and foremost by a truck loaded with Semtex and fertilisers that exploded and destroyed the building beyond economic repair. It was the biggest explosion on mainland Britain since the Second World War, and the IRA claimed responsibility.
The second driver was something that was happening on a world scale. It was the shift to electronic trading, and by the late 1990s and early 2000s, physical trading floors were basically obsolete. Shipping transactions that were the Baltic Exchange's staple were a prime candidate for the move to digital.
Suddenly, without a physical trading floor to maintain, the Baltic Exchange was free to evolve into an independent market-data and benchmarking agency. Today, it focuses on compiling global shipping indices such as the Baltic Dry Index using data provided by international panels of brokers. And that just needs a small team of analysts and administrators.
Setting aside the loss of life and injuries, the long-term overall gain and loss for the Baltic Exchange worked out better than the owners could have imagined in the immediate aftermath of the bombing.
From a corporate, economic, and operational perspective, the destruction of 24–28 St Mary Axe was an unintended catalyst that forced an acceleration of modernisation and likely saved the institution from a long, costly decline.
Had the St Mary Axe building not been bombed, the Baltic Exchange would have been trapped maintaining an expensive, high-maintenance, listed historic building whose central trading hall was becoming redundant. Selling the land and collecting the insurance freed up capital and relieved the organisation of its huge structural overhead.
Traditional exchanges worldwide spent years resisting electronic trading to protect their physical trading pits. Against that, the Baltic Exchange was forced to transition to digital operations overnight. I have to wonder how long after news of the bombing broke, the owners of the Exchange realised what an opportunity the bombing might be for their economic future.
Operating as a lean, low-overhead market-data provider transformed the Baltic Exchange into an attractive, agile business. In 2016, the Singapore Exchange (SGX) acquired the Baltic Exchange for £87 million. That was an exit for its shareholder-members that would have probably never had happened if it had still been in its Victorian white-elephant headquarters.
After the Baltic Exchange building was demolished, the land was sold. Now St Mary Axe houses the Gherkin, a 41-storey skyscraper built in 2004 and designed by Norman Foster, Its aerodynamic, spiralling design creates a chimney effect that passively regulates the interior climate. It was ground breaking when it was designed, with the building using roughly half the energy of standard office towers of a similar size.
The problem is that rectangles use space more economically, and every retrofitting upgrade to the Gherkin has to be expensively tailored to the spirals and circles of the building.
Now new rectangular buildings tower over everything and everyone, testaments to power.