HSBC warns bank levy could force UK exit

HSBC boss Stuart Gulliver hit out at Labour’s plans to increase the bank levy as he gave the strongest signal yet that the High Street giant will leave the UK.

Announcing a 4pc jump in profits to £4.6bn in the first quarter Gulliver, pictured, revealed a decision on whether to move its headquarters overseas will be made by the end of the year. If a decision is taken, shareholders will be given the chance to vote on the move at an extraordinary general meeting

Britain’s biggest bank sparked a political storm at its annual meeting last month when it confirmed it’s reviewing whether to relocate its headquarters, which have been based in London since its takeover of Midland Bank in 1992.

The Tories blamed Labour’s plans to increase the bank levy for scaring HSBC off, while Labour cited HSBC’s concerns about the UK quitting the EU – with David Cameron promising an in/out referendum by 2017 if the Tories win power.

Yesterday Gulliver focused on the impact of the spiralling levy on shareholders, which has been hiked eight times since it was introduced by the coalition in 2011. HSBC’S giant international operations means it has been hit hardest by the bank levy, which is levied on a lender’s global assets and is expected to cost it around $1.5bn (£991m) this year.

Moving the domicile overseas would mean it would only be charged on HSBC’s business in the UK, drastically cutting its bill.

Gulliver cited Labour’s manifesto commitment to raise it by a further £800m a year. Describing the ‘significant pressure from shareholders’ to look at relocation, he said the hike would make it ‘impossible to stick with our pledge to progressively raise the dividend’.

Gulliver added the jump in share price when it announced the headquarters review suggested shareholders think London is the ‘wrong location’. Hong Kong, where HSBC was established in 1865, is thought to be the most likely location if the bank decides to up sticks. But Gulliver said that if the bank did move its head office, only about 250 of its 48,000 UK staff would leave the country. Gary Greenwood, an analyst from Shore Capital, said: ‘If Labour get into power it is even more likely that HSBC will move abroad, as while both parties have suggested increasing the bank levy, Labour has said it will go even further.’

Gulliver also fuelled speculation that HSBC is mooting the sale of its retail bank and resurrecting the Midland Bank brand as he fleshed out his concerns about tougher ‘ringfencing rules’ introduced in the wake of the financial crisis.

Banks are being forced to ‘ringfence’ their High Street retail operations from their investment banking arms by 2019 to protect ordinary savers.

HSBC last month announced it is moving the headquarters of its ringfenced bank from London to Birmingham. Gulliver said such a decision could take years and that it would see how the regulations panned out.

But he said a major worry is a scenario whereby HSBC owned 100pc of t he ringfenced retail bank but had little or no control over the way it was run.