Question mark over new JP Morgan HQ

Dec 29 2009 By nebusiness

Banking giant JP Morgan may scrap plans to build a new £1.5bn headquarters in London due to the Government’s bonus tax and tougher City regulations.

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 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.

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, which was announced in the Pre-Budget Report.

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