Flirtation over as HSBC stays in London

HSBC is over its fit of pique, for now at least. UK chancellor George Osborne will rest easier with confirmation that the banking group will not follow through on its threat to relocate its headquarters from London. The bank has been based in the capital since 1992, when HSCC Holdings – formerly Hong Kong and Shanghai Banking Corporation – moved its base as part of the deal that saw it acquire Midland, one of the UK’s ‘Big Four’ banks,

The decision has been up in the air since last April as the bank flirted with different options, including moving to Hong Kong in pursuit of friendlier regulation. Other reasons cited at the time were a rise in the UK’s levy on banks’ balance sheets, the cost of maintaining a London base (HSBC is currently implementing a £3.4bn savings drive) and the requirement for the banking group to separate the retail arm from the rest of its activities by 2019.

A further reason at that time – the prevailing political uncertainty – was dispelled the following month when the UK general election saw a majority Conservative government returned.

Needless to say the move would have seriously hurt the UK’s credentials as the global capital of finance. It would likely also not have helped the image the government and London’s current mayor Boris Johnson have been crafting over the past couple of years of the UK as a home for the next generation of financial technology companies.


In the end, its board voted unanimously in favour of staying, according to a statement issued by the bank on Valentine’s Sunday.

“As we evaluated jurisdictions against specified criteria, it became clear that the combination of our strategic focus on Asia and maintaining our hub in London was not only compatible but offered the best outcome for our customers and shareholders,” said chairman Douglas Flint.

So was the whole exercise just a stunt? Cynics will call it an elaborate corporate bluffs designed to bend the government’s arm on regulation. That at least seems to have worked. Last summer Osborne extended an olive branch to the banking sector, halving the levy on banks and confirming that it would not apply to their overseas businesses. That’s a decision that’s hugely beneficial to HSBC, given the size of its assets outside the UK.

Push or pull?

However, UK tax policy isn’t the only factor at play, with volatility and uncertainty stalking the global markets. Reports also suggested that moving to Hong Kong could have increased HSBC’s tax burden.

It’s unlikely the relocation issue will resurface for some time now, with the board agreeing to ditch its previous practice of reviewing the banking group’s HQ every three years and saying it will “only revisit the matter if there is a material change in circumstances”.

In the meantime, there is still the question of whether the referendum on the UK’s continued membership of the European Union (EU), which could be held as early as June 23, will see British voters deciding that it is time to leave. HSBC also made clear that a ‘Brexit’ vote could see 1,000 investment banking jobs – 20% of its London team – shift across the Channel to Paris.


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