Member Article

HSBC may leave the UK - why should we care?

Today HSBC has unveiled its £8bn fund for SMEs. Divided by region, the fund will be accessible to small businesses across the country. The UK’s largest bank took this opportunity to note that 85% of business applications it receives are granted, while it saw 5,900 SMEs opened accounts each month in 2014.

Although great news for SMEs across the UK, for me, the launch of this fund is merely a tactic to distract UK businesses from the bank’s impending decision that will change the facing of British banking forever.

HSBC, which employs 266,000 people in 70 countries, has recently announced it is in discussions to move its headquarters out of London, perhaps even abroad. Chief executive Stuart Gulliver has been very vocal during the negotiation period, he said: “[The UK] has rejected the concept of universal banking.”

He believes that the UK’s bank levy makes it ‘impossible’ to commit to a progressive dividend policy. Gulliver has suggested that Hong Kong would be the perfect home for HSBC, even though the bank is valued at eight times the city’s economic output. For Gulliver, the most attractive thing about relocating is the Hong Kong Monetary Authority (HKMA) - the city’s watchdog, which is also the capital’s central bank and employs just 841 people. In a note published Friday, Morgan Stanley analysts suggested the HKMA may offset the additional risk of regulating such a large institution by requiring the bank to hold more capital to support its Eastern relocation. Analysts said: “We would expect exceptionally conservative regulation from the HKMA.”

Back on home turf, HSBC has said it would transfer only 250 of its 13,000 staff if it were to redomicle abroad. Now I’m not one to shed tears over the prospect of the odd unemployed banker, but there’s no doubt about whether job losses of this scale will affect the city’s economy, not to mention the UK as a whole - the question is, will it be for the better or the worse?

HSBC, which has assets valued at twice the UK’s GDP, has often been referred to as ‘too big to fail’. This is the bank that reportedly encouraged 106,000 clients in 203 countries (including the UK) avoid paying tax. In the wake of Friday’s Conservative victory, I am not hopeful for any mass-government crackdown on tax avoidance. Not only did David Cameron neglect to punish HSBC for its wrongdoings between 2005 and 2007, he then went on to appoint Lord Green, the bank’s chairman during this period, as Minister of State for Trade and Investment in 2011. The raging liberal in me says let them go, I’ll even wave off Mr Gulliver at the airport personally.

However, the negative economic effects of the bank’s relocation are difficult to ignore. HSBC is by far the UK’s biggest contributor to the bank levy, which George Osborne increased to 0.21 per cent in his March Statement, promising an extra £900m for the UK economy. HSBC already pays more than a third of Osborne’s bank levy even though it generates 80% of its profits in Asia.

In my opinion, Cameron’s government is trying to overcompensate for HSBC’s tax evasion scandal, which only came to be public knowledge earlier this year, by increasing the bank levy and therefore forcing the bank to seek a more ‘tax-friendly’ place to call home. Although, I’ve got to admit, I wouldn’t be sorry to see the bank leave our shores; it would be foolish to not consider the risks of other banks following suit, which would, quite frankly, be a disaster for the UK economy.

This was posted in Bdaily's Members' News section by Ellen Forster .