HSBC moved a step closer to leaving the UK yesterday, piling pressure on chancellor George Osborne to take action to persuade the bank to stay.
Chief executive Stuart Gulliver set out details of HSBC’s review of the location of its headquarters, looking at 11 different criteria, including taxes, the government’s attitude to finance, and the stability of the economy and regulatory environment.
Osborne is speaking at the Mansion House tonight, and is expected to soften his bank-bashing tone. But the industry does not expect him to take any big steps, such as cutting the bank levy which he introduced and has hiked nine times.
That levy is a major cost for HSBC – it is a 0.21 per cent charge on its global balance sheet, and is expected to cost it $1.5bn (£975m) this year. By contrast Barclays is set to pay around £600m, and RBS less than £300m.
A Treasury spokesperson played down chances of a tax cut: “We are committed to maintaining our position as a global financial hub. And as set out at the Budget, it is right that as it becomes more profitable our banking sector makes a fair contribution to fixing the public finances.”
Although the levy encouraged HSBC to consider leaving, other banks think HSBC will go even if it is cut. “Look at the criteria. Tax is just one point of many – I’m not sure just changing the levy would be enough at this stage,” said a source at a major US bank in London.
A senior European investment banker said other lenders may follow.
“There is a point where, no matter how awesome London is, we get uncertainty on taxes, with the increased bank levy, and bonus caps, and we chase the rich with inheritance tax and at some point, people will say, ‘That is it. London is not attractive any more,’” he told City A.M.
Authorities in Hong Kong have made it clear they would welcome HSBC back to its historic home, while Singapore is also an option.
HSBC’s brand is set to disappear from the British high street after more than 20 years, as it plans to set up a retail banking head office in Birmingham under a new name – potentially using its online brand FirstDirect or reviving the Midland signage. It could be sold off as an independent firm, which would become a member of the FTSE 100.
It is part of a wider restructuring of the global business as the bank seeks to cut costs and shift its focus to growth markets, particularly in Asia.
As a result HSBC will cut its 266,000 headcount by 50,000. Half will go through the sale of its Brazilian and Turkish units. Of the remainder, 8,000 jobs will go in the UK.
“The world is increasingly connected, with Asia expected to show high growth and become the centre of global trade,” said Gulliver. “I am confident our actions will allow us to capture expected future growth opportunities and deliver further value to shareholders.”