By Agency Reporter

LONDON: London may become less attractive to banks if the United Kingdom government bows to public pressure for higher taxes on bonuses, said Chris Grigg, chief executive officer of British Land Company, the biggest developer in the city’s main financial district.

Banks still feel “grumpy” about the political climate even after they reached an agreement with the government to limit bonuses and boost lending to fend off attacks on their compensation, Bloomberg quoted Grigg as saying on Tuesday.

He cited the example of UBS AG, the biggest tenant in British Land’s Broadgate development in the city, which he said “thought seriously” before agreeing to lease a new 700,000 square-foot (65,000 square-meter) building in August.

“You can’t keep dissing the banks and expect it to go unnoticed,” Grigg said in an interview, adding that, “UBS looked at how big an operation it should have in London versus Switzerland and the rest of the world. We know they are committed, but the concern is whether they continue to add people here or spread further around the globe.”

Bank of England Governor, Mervyn King, attacked the banking industry in a March 5 interview in the Daily Telegraph for thinking it “perfectly acceptable” to take money from “gullible” customers and paying themselves bonuses because their firms are too big for the government to let them fail.

The United Kingdom government has also raised taxes on banks’ balance sheets and is weighing whether to separate their investment and commercial banking operations.

“The government has to balance populism with economic realism,” Grigg said. “‘The rhetoric has eased slightly but it hasn’t wholly eased off, especially when you hear Mervyn King, the governor of the Bank of England, blaming the banks for the financial crisis.”

HSBC Holdings Plc, Europe’s biggest bank, said on March 7 it would prefer to keep its headquarters in London after the Sunday Telegraph reported it was under pressure from investors to consider moving to Hong Kong as a result of the tighter rules.

UBS Chief Executive Officer, Oswald Gruebel, criticised the government for not supporting the financial services industry in an interview with the Financial Times on March 3.

“It’s important that this city maintains its attractiveness to employers and as a place for people to live and we have to keep spelling that out,” said Grigg, a former partner at Goldman Sachs Group Incorporated and CEO of Barclays Commercial Bank, a unit of Barclays Plc.

Source: Punch