HSBC’S announcement that it is seriously considering shifting its global headquarters out of the UK is subtle as a sledgehammer. The statement coming from the bank’s Scots-born chairman Douglas Flint a fortnight before a general election could be seen as the banking giant wanting to get some things off its chest.
And, if down the line, HSBC does relocate back to its original Hong Kong roots, the bank is cleared of any suggestion it made its decision because it was unhappy with the election result.
Flint cites regulatory and structural reforms in the UK as partly driving the corporate HQ review, but also the bank’s concerns that the UK may quit the European Union.
His talk about HSBC having suffered reputation damage for recent scandals, such as suitcases of wonga leaving its Swiss operation in tax avoidance operations, is less relevant to the issue.
That reputational damage would have stuck wherever the bank lays its global head. In truth, HSBC may just have decided the game is not worth the candle in the UK as far as group domicile is concerned because the global centre of economic gravity is moving steadily eastwards and it should be where that action is.
The announcement of the review may be more about managing political and public expectations for a view the bank is already instinctively leaning to.
Its recent decision to relocate the head office of its UK retail bank to Birmingham by 2019 could also be interpreted as a move to soften the public relations blow of the bigger decision.
For sure, a global HQ switch would be a blow to the UK Exchequer, with the hefty tax take it has got used to from the group since it moved here with the acquisition of Midland Bank in 1992.
But that is not HSBC’s problem. Perhaps another tipping point for the group’s thinking is the coming implementation of the key recommendation of the Vickers review into banking – the call to “ring-fence” banks’ retail business from their riskier investment operations.
HSBC has the biggest investment banking presence of any of Britain’s big five banks. As such, with hindsight the financial crash of 2008 may have set the seeds for the UK and HSBC to eventually have a less close relationship.