Barclays weighs up costs of quitting UK

David Hellier
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SENIOR executives at Barclays Bank are weighing up the costs of moving the group’s headquarters from London to overseas, most probably New York.

The bank’s executives, including at board level, have spent a great deal of time poring over the issue over the past few weeks. While no final decision has been taken, they have discovered that the process of moving the group overseas would be much more complicated than many had thought.

Firms in other sectors such as the advertising group WPP and the pharmaceutical company Shire, have moved offshore for tax reasons in a fairly painless manner. However, Barclays’ experts have discovered a raft of regulatory difficulties that don’t exist in other sectors.

The issue for Barclays, which will soon be run by Bob Diamond, and for HSBC, which is also said to be contemplating a move, is that it has a large retail branch network in the UK which would still need to be regulated by the Financial Services Authority (FSA). Similar issues would apply for investment banking units.

Were Barclays to move its headquarters in order to escape from any bank levy or government decision to split its retail and investment banks, it would need to be re-authorised by the FSA to engage in UK banking activities, a potentially risky and lengthy process. There might also be demands for higher levels of capital to be held in the UK operation.

“The FSA would have to satisfy itself that it could have proper oversight over the UK operation,” said a person familiar with the FSA’s working practices yesterday. “It’s possible that this might require all sorts of safeguards,” he added.

Barclays insiders say they may be put through an excessive number of obstacles were they to choose to relocate. Some have labelled the process as getting to grips with the “exit penalties.”

The FSA would only say: “Whatever entity stayed here, it would have to vary its permission to trade here.”

Other insiders have noted that contracts written under the status quo may have to be redrawn or “novated” if the bank choses to go overseas.

Barclays, together with HSBC and Standard Chartered, has been forced to look at the possibility of relocating by the increasing regulatory and taxation burden in the UK that has followed the banking crisis.

The big banks have been hit by the one-off bonus tax, the bank levy, a raft of restrictions on bonuses from the FSA and EU, the threat of a forced break-up and the raising of the top rate of tax from 40p to 50p.

A source close to Barclays said yesterday that the issues were “too sensitive” to go into in any detail but pointed out that chairman Marcus Agius recently said that the bank would be considering all its options.

Bank executives, headed by Agius, have been lobbying the government hard in recent weeks in the hope that the industry might be given some relief from recent measures that have been brought to bear against it ever since Lloyds Banking Group and RBS were forced to go to the government for financial support.