The UK seems to be gradually losing its position in the global market as an attractive business hub for banks. Amid heightened tension due to the increased bank levy announced in March as part of UK’s annual budget and the growing concerns regarding UK’s exit from the European Union (‘EU’), several global banks have been contemplating to shift their London-based operations outside the nation. The latest warnings have come from the Swiss banking giant Credit Suisse Group AG CS and Dutch bank ING.
Per a release by The Financial Times, in pre-Budget talks, the two banks cautioned the Treasury that they are mulling over shifting some activities out of London.
In a meeting organized by the British Bankers’ Association (BBA), ING revealing its potential move said that the company was “continuously reviewing where is the best place to act”. Credit Suisse mentioned that it is evaluating moving some operations to Dublin. The bank is amid discussions with the Central Bank of Ireland for moving some back office operations in Ireland.
One of the senior officials of the Treasury, John Kingman assured several executives of banks including – Credit Suisse, ING, Citigroup Inc. C Nomura Holdings, Inc. NMR, Morgan Stanley MS, UBS Group AG UBS and Société Générale – that even though alterations in short-term policies are not likely to happen, the chancellor would provide the possible political support to the banks.
George Osborne, the U.K. Treasury chief, revealed in the March Budget that the bank levy increased by £900 million and would remain as a permanent element in the country’s tax system. Notably, the levy on bank balance sheets was introduced in 2010 following the financial crisis and has been regularly increased, with the latest annual target raised to around £3 billion.
Stressing the need for greater contribution from banks, the budget report highlighted that, “with banks now strengthening their balance sheets and returning to profitability, the government believes that the sector should be expected to absorb a greater burden of remaining deficit reduction.”
However, such policy has been largely criticized by banks. In its response to the increased levy, earlier the BBA have stated, “Banks in the UK already pay more than £40 billion in taxes each year, helping to fund schools and hospitals across the country.” It had further added, “The bank levy imposes a significant cost on banking businesses in the UK, which is making many banks move work and jobs to other parts of the world, and is deterring international banks from investing in the UK. This major increase in the bank levy is likely to accelerate that process and damage the competitiveness of the UK economy.”
The bank levy has raised concerns for HSBC Holdings plc HSBC, which is contemplating to move its headquarters from London.
Apart from Credit Suisse, several other global banks including Citigroup and Bank of America Corporation BAC are reportedly weighing options to move some of their operations from London to Ireland. Ireland has several positives that are luring banks to shift their operations from UK. These include low corporate tax rate, Eurozone membership, English language, and an English based legal system. Dublin – the capital and one of the largest cities in Ireland seems to be the hotspot now.
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