Beware the dangerous complacency about banks staying in the UK

12 January 2011

3 minute read

Beware the dangerous complacency about banks staying in the UK

Bob Diamond is not popular. This is not entirely surprising - he was never the nation's favourite. Last year, Peter Mandelson called him the 'unacceptable face of banking.'

However, Diamond's popularity is plummeting to new lows. Following yesterday's Select Committee appearance and his assertion that the time for remorse is over, Bob has placed himself on the frontline of the unwinnable battle to rehabilitate the image of the investment banker.

This is a mistake. Diamond's appointment as group chief executive is in danger of becoming a PR fail for the Barclays Group, which would have been better advised to appoint for a lower key figurehead less immersed in investment banking.

What Bob did next

How will this pan out over the next five years?

If Diamond's vilification continues, the danger is that Barclays will decide it made a mistake in appointing him as group head. This could prove disastrous for BarCap; it could also lead to Bob deciding that BarCap would be better run out of the US, away from the carping in the UK.

Yesterday's rejoicing in the fact that Diamond said Barclays will always be headquartered in London - even if the Banking Commission orders the separation of retail and investment banking - is therefore premature. Barclays Group will always be headquartered here. BarCap may not.

Take JPMorgan

The fact is that UK anti-banking sentiment has already had a tangible effect.

JPMorgan is attempting to pass off its occupation of Lehman's old building as a great win for London. It is anything but.

JPMorgan had planned to spend 1.5bn on a new 2m square foot development at Riverside South in Canary Wharf. Instead, it's spending 495m on a building half the size.

Yes, it's still developing the Riverside site, but instead of building two large towers, it's developing the site to ground level. This looks more like a means of avoiding the 76m fine associated with pulling out of the development than a big commitment to growth in the UK.

The implication is clear: JPMorgan was planning big growth in London; now it's not.

Yesterday, Andrea Leadsom, a Conservative MP and former banker herself, accused Diamond and other banks of having 'no clothes' over their threats to pull out of the UK. Leadsom need only look at JPMorgan's reversal to realise that the clothes are very real.

The UK's financial pre-eminence may not disappear overnight, but it will disappear. The danger is that nothing else will rise to fill the gap.

AUTHORSarah Butcher

Global Editor

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FinanceCowboy
13 January 2011
It would have a much greater effect if the heads of the big British banks got together and contemplated a joint move out of Britain - sort of a macroeconomic team lift.
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sx
sx
13 January 2011
Newspapers have lots of responsibility for repeating always the same simplistic arguments. Is it possible that there are so few honest journalist who can write a decent article about the recession and the credit crisis? Why economics professors (outside government) are interviewed so rarely? Most of them will explain that blaming banks for the credit crisis is just dumb.
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Le
Leaving...
13 January 2011
Economist - my background is actually very working class. I was brought up on a council estate in a Midlands manufacturing town. I have every right to tell you that the average Joe is idle, unambitious and lazy. I went to school with many of them...
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Fa
Fat Cat
13 January 2011
Economist - With your views you should be in North Korea or Vietnam, those are "nice" communist countries in which you could continue your struggle against bankers.
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Ec
Economist
12 January 2011
Sorry, the real class warriors are some of the those who comment on this website, who make sweeping accusations against public sector workers claiming that they are "bone idle", "lazy" and are unambitious, just because these workers care more about the positive social externalities their work produces rather than about simple private profit. This is class warfare, because many of these public sector workers are working class people, who didn't receive the private school education that appears a prerequisite to get into the top universities, and therefore stood no chance of getting some of the well paid City Jobs, because as some City recruiters on this website have already said, they have some deep prejudices about certain universities, and if you don't belong to them, it's assumed you are some unsophisticated, working class oik without the talent for a finance job.
The UK government has been conducting class warfare for the last 30 years, because they failed to support manufacturing industry when it was struggling, but bailed the banks out, because the City is full of middle class, privately educated people rather than working class individuals who worked in factories and mines.
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