HSBC could move global HQ to avoid UK taxes and regulation
HSBC, Europe's biggest bank, has ordered a review into whether it should shift its headquarters out of Britain and potentially back to its former home in Hong Kong, a move that could threaten London's reputation as a global hub for finance and investment.
The announcement from HSBC, founded in Asia but a key part of the British establishment, prompted a warm response from Hong Kong, where it is revered as "The Bank".
The news prompted silence from Downing Street.
HSBC made $24bn (€33.5bn) in profits in Hong Kong over the last three years, compared to a $4bn loss in Britain over the same period.
News of the review comes less than two weeks before the British general election on May 7 and poses challenges for both Prime Minister David Cameron, who is seeking to return to power, and his Labour party rival, Ed Miliband.
HSBC has been one of the most vocal critics of the new regulations and additional taxes imposed on British banks in the wake of the financial crisis and chairman Douglas Flint singled out the threat of Britain withdrawing from the European Union in a speech to investors yesterday.
Mr Cameron has pledged to hold a referendum on Britain's membership of the EU if his Conservative party is re-elected and the opposition Labour party seized on HSBC's announcement.
"HSBC is just the latest in a long line of companies warning of the dangers of a re-elected Tory (Conservative) government taking Britain out of the European Union," said Labour finance spokesman Ed Balls.
A Conservative Party spokesman declined to comment on HSBC's announcement, but said Britain's future membership of the EU was a decision for the British people.
Labour's plans to raise taxes on banks if it comes to power may also influence HSBC. The bank is already expected to pay $1.5bn under a UK bank levy this year, or about 7pc of expected profits because it is taxed on its global balance sheet. That charge is up from $1.1bn last year.
Taxes, tougher regulation and rocketing house prices have already encouraged some banks to move operations out of London, even before the threat of a possible exit from the EU.
Some HSBC shareholders have been urging the bank to consider returning to Hong Kong to cut costs and yesterday's announcement prompted a 3pc rise in its stock, helping to lift Britain's top share index back towards its record high.
"This is more than just sabre-rattling, they clearly want the establishment to know that HSBC doesn't necessarily belong here," said one investor in the bank.
HSBC last reviewed its domicile in 2010, and had said it would reassess its position in 2015. Analysts put the cost of moving at between $1.5bn and $2.5bn.
Reuters reported on Sunday that executives at HSBC and rival Standard Chartered were looking at quitting London for Asia. Investors told Reuters they wanted the banks to do a thorough analysis.
A second UK bank with a big Asian focus, Standard Chartered, said on Friday it was "listening very carefully" to shareholders on whether it should consider moving headquarters out of Britain.
HSBC was founded 150 years ago as the Hong Kong Shanghai Banking Corporation. It moved from Hong Kong to London in 1993.