Threats to leave these shores look like empty bravado

AS the snow continued falling, the depressed hoards of public sector workers stomped through the icy streets on the way to work. As the biting wind lashed against them, they turned their faces to the floor and wondered if they would have a job to go to in 2011.

Inside, a burst of warm air flew across a City drawing room as a banking executive prodded the coals of the roaring fire. Tis the season to be jolly, la la Libor, he murmured, but he wasn't feeling at his best.

Things had picked up in 2010 but banking wasn't as much as fun as it used to be. Only a measly 7bn was paid out in bonuses this Christmas. A year that had started with Britain in the midst of the longest and deepest post-war recession had ended with the heaviest December snowfall for two decades. Collateralised debt obligations would be much more fun if they were done in the balmy air of Hong Kong or Switzerland.

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Just a few miles across town, a politician stared at his red patent leather dancing shoes, bought especially for Christmas, and sighed. Better with or without them? Then he thought of the bankers and sighed again. Better with or without them?

Vince Cable had been fearing a tough festive period. He was looking even more gloomy then normal after being plucked and stuffed over university tuition fees last week.

But then an early Christmas present arrived at his door. Investment banking giant JP Morgan had clinched a 495m property deal to house its European headquarters in Canary Wharf. Even Dr Cable couldn't suppress a smile. Maybe he was right, after all?

He had spent the weekend telling everyone the coalition "won't be bullied" by bankers, after Britain fell into line with the rest of the EU on bonus rules, and the FSA agreed to cap the cash component of any bonus at 20 per cent of the total award. Now here was some proof that his strategy might actually be right.

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JP Morgan's investment would prove that rather than spelling the end of the City as we know it, restricting remuneration would restore some credibility to the tarnished world of high finance.

It was a truth which most taxpayers realised long ago, but one that is only now beginning to penetrate Westminster: that bankers' threats to desert to Britain for the Far East are by-and-large empty bravado. The mass exodus is not about to happen. Of course, one or two institutions could go, driven out in fury over pay, bonuses or the 50p income tax rate, but many more will stay.

From across the whole of British business, the only really big name which has said it will leave is Wolseley, the building supplies giant which plans to move its tax base from the UK to Switzerland because of "unhelpful" corporate tax legislation.

The only bank whose future as a London-based business is so far in genuine question is that of HSBC, and even that doubt is not entirely driven by the political weather, given that it reviews its prime location every three years.

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Its vast Asian businesses means it has a motivation beyond tax for abandoning Blighty and it would undoubtedly reap some benefits from a move.

Similarly, its loss would be painful for the reputation of the City, of Yorkshire and of Britain. While HSBC would likely keep thousands of staff in this country, including at First Direct, its Leeds-based internet and telephone bank, high-earners would flee to the East.

But will it happen? HSBC did not need a taxpayer-bailout, but has still benefited from the range of guarantees introduced to shore up the system, while its outgoing chairman Stephen Green will shortly take up a role as Trade Minister.

Would Green's former employer then embarrass the Government he had joined? The remarks by Michael Geoghegan, the newly departed chief executive, that shareholders are questioning the viability of keeping's HSBC British base may induce a sense of foreboding but they are simply an early gambit in the long struggle between the top banks and the coalition Government.

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That political wrestling match – postponed yesterday when snow prevented George Osborne flying back from New York to meet Royal Bank of Scotland, HSBC, Barclays, Lloyds and Standard Chartered – will run for months and end in a predictable trade-off, where Ministers claim victory but banks will continue coughing up six and seven-figure sums for the "star" wheelers and dealers.

They'll be doing so here, however, because whatever nasty things people say about them, they know they can make a lot of money in this country.

In the meantime, the poor blighters who have paid for the bonuses at RBS and HBOS-owned Lloyds await 2011 in grim mood. The State might make a profit on its banking investment but ordinary folk know that, much like the weather, the wider economy could get worse before it gets better.

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