Merrill sites pounds 300m HQ in the City

Merrill Lynch, the giant American investment bank, will announce today that it will build a pounds 300m head office on the site of the old Royal Mail sorting office in King Edward Street, London.

Merrill, which is number one in the world for underwriting equities and issuing debt, earns a fifth of its profits outside the US, and is on record as wanting to increase this proportion to 50 per cent as soon as possible. The London-based European operation is seen as key to that expansion. The 500,000 sq ft building will enable Merrill to house 1,000 more people in London, and represents a big vote of confidence in the City as a world financial centre.

The development will be a feather in the cap for Michael Marks, Merrill's chief operating officer for Europe and former Smith New Court boss, who has been in the post for two months.

Merrill refused to comment yesterday. However, a consultant close to the deal said that the bank had considered moving to Canary Wharf in London's Docklands but turned down the idea. It is understood it was worried about travel times to and from Canary Wharf, and the impact on recruitment and retention of staff.

The development site is behind Barts Hospital and near Paternoster Square. It includes one listed building, currently being used as the head office of Post Office Counters, which will be preserved. The sorting office, which takes up most of the site, will be demolished.

It is understood that Merrill will transfer its staff from Ropemaker Place in the City to the new building when it is completed in 2001. The bank intends to retain its building in Farringdon Road, which houses the former Smith New Court market making operation, and its private client business in Chester Street .

Merrill's plan follows the move by rival investment bank BZW to new offices in Canary Wharf. Citicorp is building its own landmark head office in Canary Wharf.