Scandal-hit HSBC claims it may quit UK in election bombshell

Bank's chief cites risk of Britain’s potential EU exit if Tories regain power

Protestors demonstrate outside a testy HSBC annual general meeting in London (David Sandison)

HSBC planted itself squarely into the middle of the general election campaign by announcing a review into whether to quit Britain and citing the country’s potential exit from the EU as a negative for the bank.

Speaking at a testy annual meeting, the controversial bank’s chairman Douglas Flint said the question of its UK base was a “complex one”, adding “it is to soon too soon to say what form the decision will take and what the conclusion will be. But the work is under way”.

He blamed “regulatory and structural reforms” to the industry in the wake of the financial crisis for the review.

However, in what could be seen as a direct shot across David Cameron’s bows, he chided: “Working to complete the (EU) single market in services and reforming it are far less risky than going it alone.”

HSBC has been mired in controversy over the way its Swiss private bank handled the tax affairs of wealthy clients and is facing prosecution in a number of jurisdictions.

It has also paid huge fines over sanctions busting and the use of its Mexican unit by drug lords to launder dirty cash. A US monitor was installed to keep watch on compliance.

But the bank still felt it enjoys sufficient clout to lay down the gauntlet to British politicians, amid its unhappiness over regulatory reforms, notably the banking levy.

HSBC has long complained that this hits it disproportionately, because it is based on a bank’s balance sheet. HSBC, which makes most of its profits overseas, has the largest of the UK-based banks.

It has cited shareholder pressure in the past to justify its equivocation over its UK base. However, the bank has been less accommodating to critics among shareholders of its pay policies and to those unhappy with directors because of the lengthy and costly list of scandals it has been embroiled in.

One shareholder, Michael Mason-Mahon, said at the meeting: “Which country are you likely to go to? How many countries have you not committed illegal and criminal behaviour in?”

Nearly 24 per cent of shareholders voted against the remuneration report and several directors saw unusually large votes against their re-election, notably the remuneration committee chairman Sir Simon Robertson but also BBC trust’s chairwoman Rona Fairhead and Mr Flint.

In response for calls for heads to roll, Sir Simon said: “I want to stress that the board has full confidence in Douglas, [chief executive] Stuart [Gulliver] and the rest of the team. There are no plans to change any of them. I know I speak for the whole board.”

Political reaction to the Mr Flint’s statements on Europe was swift. The shadow Chancellor Ed Balls said: “HSBC is just the latest in a long line of companies warning of the dangers of a re-elected Tory government taking Britain out of the European Union.”

Danny Alexander, the Liberal Democrat Chief Secretary to the Treasury, said: “Today’s HSBC announcement confirms fears that businesses have over a swing to the right and the prospect of a ‘Blukip’ coalition pulling us out Europe.”

But the Chancellor, George Osborne, said: “We have to have properly regulated banks. But if we proceed in this country with an anti-business set of policies we are going to drive companies abroad. We are going to see jobs lost.”

Simon Walker, the director-general of the Institute of Directors, said it had been “broadly supportive” of new banking regulation but added: “There have been instances where the regulatory pendulum has swung too far.”