Time running out to halt City exodus

first_img by Taboolaby TaboolaSponsored LinksSponsored LinksPromoted LinksPromoted LinksYou May LikeFactableThis Is What Historical Figures May Have Really Looked LikeFactableFamilyThisThe Biggest Wrestlers From Back In The Day & How They Look NowFamilyThisItsTheVibeThe Cutest 1980’s Stars Are Now In Their 60s, This Is Them NowItsTheVibeMovie JewelInside Coco Chanel’s Eerily Abandoned Mansion Frozen In TimeMovie JewelDaily FunnyFemale Athlete Fails You Can’t Look Away FromDaily FunnyTaco Relish20 Southern Phrases Northerners Don’t UnderstandTaco RelishZen HeraldShe Inspired Three Of The Most Popular Songs EverZen HeraldBridesBlushThis Is Why The Royal Family Kept Quiet About Prince Harry’s Sister BridesBlushLiver Health1 Bite of This Melts Belly And Arm Fat (Take Before Bed)Liver Health whatsapp KCS-content whatsapp IMAGINE the scene. It’s late 2011; Bob Diamond, Barclays’ boss, is posing with New York’s Mayor Michael Bloomberg in front of the firm’s New York headquarters. Bloomberg is boasting to the local media about how much he expects his city to make in extra tax receipts from Barclays’ relocation, which has just been completed. Meanwhile, in London, panic has broken out: the goose that laid the golden tax and jobs eggs is beginning to fly away, and nobody knows what to do. The populist media are cheering the departure of the hated bankers while calling for massive retribution against the firm’s UK assets – but in Downing Street, the penny has finally dropped. They went too far with the rhetoric, massive tax hikes and break-up threats – and are now paying the consequences in reduced tax receipts, job relocations, fallout across the rest of the City and the collapse of Britain’s reputation as a hub for global firms.Science fiction? For the time being, perhaps. Barclays is still here, based in its gleaming tower in Canary Wharf; HSBC remains technically headquartered in the UK, though its CEO has already relocated to Hong Kong. While the corporate exodus is accelerating, most departures have been either non-financial firms such as Wolseley, the heating and plumbing giant, or smallish hedge funds. But as we reveal in our exclusive story on page one, Barclays is now considering very seriously whether or not to move. Its responsibility to its shareholders is to maximise profits, and the costs of being based in Britain keep on rising. Barclays’ board has discussed the issue repeatedly; a vast amount of work has already been done. No decision has been taken, however, partly because several intriguing obstacles to a departure have been uncovered. The potential problems add up to what a senior source has described to us as “exit penalties”. These include the need to reapply for FSA authorisation for the remaining UK operations (retail and wholesale), the possibility that many contracts would become invalidated (and have to be “novated”), the possibility that more capital would have to be kept in the UK operations, and other possible bureaucratic hurdles or penalties. So while firms such as WPP, the advertising giant or Shire, the pharmaceutical maker, found it easy to relocate for tax purposes, it would be trickier – albeit certainly not impossible – for the likes of Barclays to do so.There is another point which Barclays’ board has doubtless considered. The UK authorities have a vast amount of leverage over the banking industry, and especially over universal banks with large retail operations. Barclays is especially at risk of any attempt to push through a UK version of Glass-Steagall, separating investment banking from retail banking (a course of action that has been largely rejected in the US). It also stands to lose out if the UK authorities decide to force existing retail banks to sell off some of their branches. So it may be that Barclays is hesitant to relocate for fear of being severely punished by a vengeful government.Regardless of any of these barriers to exiting, the day that one of London’s biggest banks finally decides to up sticks is edging ever closer. Contrary to what the banker-bashers would like us to believe, this would be a disaster for London, for jobs and for the UK’s prosperity. The ball is in George Osborne’s court; he needs to drop his anti-City rhetoric and taxes before it is too [email protected] Share Wednesday 27 October 2010 9:01 pm Time running out to halt City exodus Show Comments ▼ Tags: NULLlast_img

Leave a Reply

Your email address will not be published. Required fields are marked *