HAVE you ever played Whac A Mole? A menacing, flinty eyed mole pops up out of his hole, and no sooner have you whacked him down than another menacing mole pops out of another hole. However hard you whack, that menace remains.
It is the same for those who defend London as a global financial services centre. The Independent Commission on Banking mole popped up threatening to force the break up of the banks, but saw the light and ducked back down.
The recommendations balance the competing interests of banks, their shareholders, consumers and taxpayers. Banks are still studying the small print, but requiring them to ring fence retail deposits so they are not used in investment banking is unlikely to be too great a burden to bear.
But now comes another threat – the belief that actually we shouldn’t worry about whether London loses its banks headquarters to New York, Hong Kong or Singapore. This line of thought accompanied the Commission’s report, and has been repeated by financial commentators since, and is in danger of going mainstream.
We shouldn’t worry about losing an HQ, the line of thinking goes – it just means you lose a few executive jobs, but the bulk of the business and workers would stay behind unaffected; and while the government will lose a little bit of corporation tax, it’ll keep the income tax on the workers, which is where the real revenues are.
This is defeatist twaddle. The location of HQs is very important, which is why countries fight over them. There is the obvious reputational impact on London, which would have longer-term consequences.
But most importantly, HQs aren’t just a few executives and a brass nameplate detached from their operations. When top executives go, their senior staff want to go with them – they’ll never get a promotion if their bosses never see them. Legal and other professional services firms must go where their clients are.
If the HQs go, our other sectors that are global centres of excellence start being unpicked. And the jobs and tax argument fails the reality test – Google set up its European HQ in Dublin because of the corporate tax rate, and now it employs three times as many people there as in London, all paying income tax to the Irish not British government.
The location of HQs matters. The good news is we have a strong chance of keeping them. The danger is that we start taking them for granted.
Anthony Browne is an adviser to the Mayor of London