In late March 2015, senior executives from HSBC and representatives of the UK's second city, Birmingham, gathered to celebrate the bank’s decision to move its ringfenced head office and transfer 1000 jobs from London to Birmingham. A room full of middle-aged men drinking orange juice is hardly a setting that evokes images of a wedding celebration, but HSBC's decision to tie the knot with Birmingham did indeed follow a long courtship process, according to Wouter Schuitemaker, investment director at Business Birmingham, the city’s economic development body.
Mr Schuitemaker says the process started about three years ago when Birmingham authorities sent a letter to Stuart Gulliver, HSBC’s chief executive, stating that his bank was valued as the best employer in the city. Then when in 2013 it appeared the Banking Reform Act would force the UK’s biggest banks to split their retail and wholesale units to better absorb potential shocks, HSBC approached Birmingham authorities saying that the bank was looking at the city as a site for its ringfenced operations. There were other candidates, of course, but it was Birmingham’s proposal that stole HSBC’s heart.
What is the rationale behind HSBC’s decision? Some might say sentiment. In 1993, the then Hongkong and Shanghai Banking Corporation acquired Birmingham-founded Midland Bank, gaining a strong foothold in the UK. However, the statement issued by António Simões, chief executive of HSBC UK, does not seem particularly sentimental.
“The city is close to London, but also brings us within easy reach of our 16 million customers based across the UK,” he said. “Birmingham is a vibrant, growing city that has the expertise and infrastructure to support our ringfenced bank and brings us a step closer to our ambition of being the bank of choice in the UK.”
HSBC would not comment beyond what Mr Simões has already said as it is in advanced negotiations to acquire the lease for its new Birmingham headquarters. The bank is expected to move to Arena Central, a mixed-used complex located in the Birmingham City Centre Enterprise Zone. Operating out of such zones typically brings tax incentives granted by the city. The bank might also save on payroll, as costs of labour are lower in Birmingham than in London. That saving is more a mid- to long-term matter, however, as HSBC has declared it is willing to relocate its London-based employees, rather than lay them off and hire locals.
HSBC’s move is a big vote of confidence for Birmingham, the city that saw its economy all but collapse in the 1980s and which is still fighting its image as a dull post-industrial city. “Those who said we will not bounce back, well, the joke is on them. Last year alone we had more than 5000 Londoners move to Birmingham,” says Mr Schuitemaker. Only time will tell whether the marriage of HSBC and Birmingham will be a happy one.