Is Barclays also bluffing about a UK exit?
Cunningly timed or strategically leaked, a week after the publication of the UK banking levy, City AM has this morning painted an apocalyptic picture for the future of London, lead by the revelation that Barclays has been seriously considering moving to New York.
The levy is considered yet another reason for banks in the UK to hop overseas and, according to the paper's sources, Barclays has been weighing up the viability of shifting its HQ to NYC.
Strangely though, this appears more like a piece of lobbying around the dangers of overly-punitive regulation in the City, and it seems likely that Barclays won't actually leave after considering the practicalities.
Central to this is the 'exit penalties' imposed by the FSA, including the requirement to reapply for authorisation for the remaining wholesale and retail operations, the need to bolster capital in UK operations and the fact that existing contracts would become invalidated.
Hiring at BarCap may now be decidedly frosty, but its expansion in Europe over the last year, particularly in equities and M&A, has been aggressive. Similarly, the creation of its back office shared services hub in Glasgow, which will eventually create 600 jobs, doesn't seem like the actions of a bank retreating from the UK.
More broadly, as we've pointed out before, most banks have built up substantial UK corporate tax credits from their losses in the downturn, and the ability to offset these again future UK profits could keep them here for years to come.
There's also the question of whether the Barclays story is anything new. In September, Sky suggested that the bank was looking into the viability of shifting its headquarters to either New York or Singapore and former Schroders MD Philip Augar argued in the FT that it was possible to run BarCap as a separate entity out of the US.
This makes rhetoric in favour of splitting investment and retail banking functions from the likes of Mervyn King
(vociferously opposed by Bob Diamond) all the more worrying.
But what this all highlights is that, despite the threats and political posturing, moving the HQ of large financial institutions out of the UK is a decidedly more costly and complex process than many assume.
