City grandee Spencer says Icap ‘will quit UK’ if Europe imposes Tobin tax

THE owner of one of the City of London’s linchpin firms has given warning that it would move the business abroad if the European Union imposes its threatened “Tobin tax” on financial transactions.

Michael Spencer, the wealthy founder and chief executive of Icap, the world’s biggest interdealer broker, said such a levy on bank transactions would severely undermine the City if it was not adopted globally.

Spencer said at the weekend a European Tobin tax could drive business that is currently dominated by the City overseas to financial centres like New York and Singapore.

He said at the weekend: “This tax would destroy the City and cost the Exchequer billions of pounds, but it would benefit Brussels.

“Companies like Icap will simply move elsewhere outside the EU if Nicolas Sarkozy and Angela Merkel [the French and German leaders] push ahead with this silly tax.”

Spencer’s intervention in the highly‑charged Tobin tax debate, which is sometimes also referred to as a “Robin Hood tax”, will be seen as highly significant as his company has not considered moving off‑shore after previous tax increases, such as the higher 50p personal tax.

Angela Knight, chief executive of the British Bankers Association, told The Scotsman yesterday that such potential loss of businesses like Spencer’s to the UK was a serious one.

Knight said: “The UK is Europe’s largest financial centre and any potential increase in the cost of doing business here brings a risk that firms will relocate to places where it is cheaper – and easier – to operate.

“Apart from the practical difficulties involved a tax on financial transactions would obviously hit Britain’s financial sector, risking UK jobs and businesses as well as posing another threat to economic recovery.”

However, the Icap boss made clear that an EU financial transaction tax would be so damaging to his business that it would have not option but to quit the City.

Spencer is the most high‑profile City grandee to declare that he would relocate his business should Brussels force through the Tobin tax, which the EU has already tried unsuccessfully once to implement.

He was reported at the weekend as saying: “This is another cynical threat by Sarkozy who knows this tax would overwhelmingly hit London as this is where trillions of dollars are traded each day in the foreign exchange, equities, commodities and derivatives markets. It could only work if adopted globally.”

A leading City trader said: “Spencer might be the first to fire a shot over regulators bows on the re‑emergence of the Tobin tax issue. But he might well not be the last.

“Britain has too much to lose in terms of receipts for the British Exchequer. Our international equities, bonds and forex business outguns the rest of the EU combined. Our forex is bigger than the US and Japan combined.”

Plans for a tax on financial transactions are due to be tabled at an EU meeting in September. It follows last week’s summit between Merkel and Sarkozy, when such a tax was discussed as one way to help alleviate chronic market volatility in the eurozone.

It is estimated that such a tax across all 27 EU countries could raise up to €200 billion (£175bn).