Bank 'may scrap UK HQ plans over bonus tax'

Banking giant JP Morgan may scrap plans to build a new £1.5bn (€1.66bn) headquarters in London due to the British Government’s bonus tax and tougher City regulations, it was reported today.

Jamie Dimon, chief executive at JP Morgan, is understood to have expressed anger about the new 50% tax on bonuses in a telephone call with Chancellor Alistair Darling earlier this month.

He is also said to be concerned about the Financial Services Authority’s crackdown on executive pay and the new 50% higher rate of income tax on high earners, according to newspaper reports.

Mr Dimon is said to be particularly frustrated about the bonus tax as JP Morgan emerged from the financial crisis as one of the strongest banks and did not require a Government bailout.

The investment bank is in the process of building a new European headquarters in Canary Wharf.

But a clause in the group’s contract with developer Songbird Estates gives it the option to pull out of the deal before the end of 2010.

Sources close to the bank said scrapping or substantially scaling down the development had been on the cards for the past two months, according to the Daily Telegraph.

It added that a JP Morgan executive had said: “There were no threats made on the call and we have made no decisions on people or buildings based on the super-tax announcement.”

A Treasury spokesman told the newspaper: “Alistair Darling regularly discusses this type of issue with senior executives.

“The tax on bonuses is a fair measure because no bank would be left standing without Government intervention.”

JP Morgan is thought to be one of several international banks that are concerned that the UK is becoming an increasingly unattractive place to do business.

There is also speculation that HSBC may shift its headquarters away from London, after the group recently announced its chief executive Michael Geoghegan would move to Hong Kong in the New Year.

Barclays chief executive John Varley has also publicly criticised the Treasury’s 50% tax on bank bonuses of more than £25,000 (€27,700), which was announced in the Pre-Budget Report.

The Government has estimated the move will bring in around £550m (€611m), but some analysts believe it could raise as much as £3bn (€3.3bn) for the Treasury.

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