Parties blame HSBC move on tax and EU fears

HSBC's review of whether to remain headquartered in the UK prompted a war of words between the Conservative and Labour parties on Friday, as both sides embarked in a blame game over the bank's announcement.

With two weeks to go before the general election, Chuka Umunna seized on HSBC's concerns over a possible British exit from the EU to attack the Conservatives' "irresponsible" policy on Europe.

"HSBC's statement today serves to illustrate how irresponsible it is to play fast and loose with the UK's membership of the EU," the shadow business secretary said.

"It would be a disaster for our financial services sector and business in general if the UK left the EU. Better to stay in and lead reform."

But Conservative figures hit back at the attack, saying that Labour's attempt to frame HSBC's announcement as a response to David Cameron's promise of an EU referendum was "laughable".

"Everyone knew HSBC has been looking at this for some time," said one senior Conservative. "This is about tax - and all businesses know Labour is proposing increased levies on banks and all sorts of interventions in the banking sector."

"Of course we want HSBC to stay and we are confident it will. But there is a huge risk under a Labour government that companies like this will be tipped over the edge with plans for higher corporation tax and increased bank levies."

HSBC said it was considering moving its headquarters out of the UK because of rising tax and regulatory costs.

Douglas Flint, HSBC's chairman, has come under pressure from investors to consider moving the bank away, as the UK levy on banks' global balance sheets cost HSBC £750m last year.

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David Cameron, campaigning in the east Midlands on Friday, said HSBC's review was "an important reminder of how vital it is that we keep a pro enterprise, pro business, pro employment policy in our country. We need to keep taxes low, make this an attractive place to invest."

All the main UK political parties have committed to maintaining or raising a levy on British banks to help pay down the budget deficit or fund additional spending - for example, on childcare. In addition, larger banks will have to meet the costs of ringfencing their retail operations from investment banking activities by 2019.

"As I said at our informal meeting in Hong Kong on Monday, we are beginning to see the final shape of regulation and of structural reform, including the requirement to ringfence in the UK," Mr Flint said.

"The board has therefore now asked management to commence work to look at where the best place is for HSBC to be headquartered in this new environment."

Last month, HSBC announced that, as part of its ringfencing plans, it would move its UK retail and business operations to Birmingham by 2019.

A senior Treasury figure on Friday told the FT there was "no question" of the government backtracking on the ringfencing reforms in light of the HSBC review.

George Osborne, the Conservative chancellor, has also said that the UK bank levy, which will raise more than £3bn next year, is to become a permanent fixture of the tax system.

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