Financial experts remain confident that London will continue to remain one of the world’s best global financial centres for business bank accounts despite Wall Street discontent over the UK bankers’ bonus tax.
While Wall Street’s best business bank accounts paid out $2.3 billion to the British Treasury in the second quarter, the decision did not sit well with some very vocal opponents to the tax.
Angered by the bonus tax, JP Morgan’s chief executive Jamie Dimon may be behind the heel-dragging on the plans to build a $3 billion headquarters in London, while John Gerspach, CFO for U.S. bank Citigroup, has been threatening to pull out of the UK if it continued to impose such high taxes on banks.
Most experts were unimpressed with the bluster of the executives, however, and played down any risk of the possibility of any flight from London. Lee Thacker, employed by Sheffield Haworth, commented that while there is a threat that some internal people may want to move to Asia, it only accounts for approximately 2 per cent of any staff turnover.
Thacker continued by stating that Citigroup’s threats ring false as well; he indicated that relocating its entire operation to New York from London would result in a loss in revenues of nearly 90 per cent.
UK banks were not immune to the tax on bankers’ bonuses. HSBC paid what it estimates as $355 million in taxes, RBS paid £208, and Barclays was taxed £225 million.
The political climate going forward is an uncertain one. While the government has not yet confirmed it will reintroduce the tax on bankers’ bonuses, the UK has joined with Germany and France by an additional levy on bankers’ balance sheets. The government hopes it will raise an annual £2.5 billion in additional funds for the fiscal year ending in 2014.
Tony Deacon, who is employed by Emerald Group, a global banking headhunting firm, stated that London remained an ideal choice for high-powered banking executives due to its geographical location between Asia and the Americas, enabling bankers located in London to conduct business with both New York and Tokyo in the same day.
Deacon continued, commenting that London truly is the epicentre of the banking industry.
Correlate Search’s managing director Simon Vaughan-Edwards added that there were few people he had encountered whilst working for the headhunting firm that had expressed major concerns over the tax on bonuses.
He commented that while there may be a large amount of political posturing occurring, very little impact has been seen in regards to the overall compensation packages to individual senior bankers. Correlate Search had been prepared for a talent outflow last year to such locations as Switzerland, concluded Vaughn-Edwards, but the flight from London never materialised.