Why HSBC’s threat to leave London is a big deal
HSBC’s move today is a severe blow to the Tories. Not only is Britain’s biggest bank threatening to move its headquarters out of London, it’s citing uncertainty around Britain’s membership of the EU as one of the decisive factors.
The bank has been threatening to move its HQ for some time but up until now it hasn’t linked the potential decision to Europe. And coming as it does just a couple of weeks ahead of the general election, it’s given Labour a real stick to beat the Tories with.
For all Labour’s perceived “anti business” rhetoric on taxes and interventions in the energy market, its stance on Europe has struck a chord with business leaders, many of whom see David Cameron’s promise of an in/out referendum as potentially economically disastrous for the UK. So to have Britain’s – and Europe’s – biggest bank publicly express those fears this morning is a big deal.
Of course, the ever-increasing creep of banking regulation is a factor too, but when combined with a potential Brexit, the image is one of a Britain that’s not the best place to do business. And that does not play well for the Tories one little bit.
The market seemed to applaud the thinking too, sending HSBC’s shares up 4 per cent after the statement, which was released ahead of the bank’s annual shareholder meeting in London. That adds a cool £4bn to the bank’s market cap and could potentially prompt others to start thinking the same way.
George Osborne and the Tories have spent much of their pre-election campaign warning that investors’ big fear is a Labour government propped up by the SNP in No.10.
Yet in his statement today, HSBC’s chairman Douglas Flint made clear it was the group’s own investors that had questioned whether London was the right home for the bank.
Here’s what he said:
“I said at our informal meeting in Hong Kong on Monday, we are beginning to see the final shape of regulation and of structural reform, including the requirement to ring-fence in the UK.
“As part of the broader strategic review taking place, the board has therefore now asked management to commence work to look at where the best place is for HSBC to be headquartered in this new environment.
“The question is a complex one, and it is too soon to say how long this will take or what the conclusion will be; but the work is under way.”
Then, the killer blow for the Tories:
“One economic uncertainty stands out, that of continuing UK membership of the EU. In February we published a major research study which concluded that working to complete the single market in services and reforming the EU to make it more competitive were far less risky than going it alone, given the importance of EU markets to British trade.”
Its reputation may still be tarnished by the tax scandal at its Swiss office, but today’s statement could prove Britain’s biggest bank is still influential enough to have an impact on the campaign trail. It will be interesting to see the Tory response.
Chuka Umunna, Labour’s shadow business secretary, was quick enough with his.
If the Tories win, many firms will have to enter into their risk registers the possibility of the UK leaving the EU http://t.co/I1SDsLbz2v
— Chuka Umunna (@ChukaUmunna) April 24, 2015
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