HSBC’s move from Canary Wharf to St Paul’s is a big win for the City and hybrid working
HSBC is set to leave its home of 20 years at 8 Canada Square in Canary Wharf, and relocate to a site near St Paul’s Cathedral previously occupied by BT.
The move, first reported by The Times, is hugely significant in what it says about demand for office space – and not just in London.
HSBC’s existing headquarters in London, to which it moved in 2002, currently houses up to 8,000 employees at peak hours. The new development, Panorama St Paul’s, is roughly half the size.
That reflects the fact that HSBC does not expect as many of its employees to be working in its head office at the same time in future.
It is a clear indicator from one of the biggest employers in the UK financial services sector that hybrid working, where employees work from home for a certain number of days a week and in the office for others, is here to stay.
At odds with others
The decision also puts HSBC at odds with some of the big Wall Street banks that dominate the investment banking landscape. The likes of JPMorgan and Goldman Sachs have been strident in their calls for employees to return to the office in the post-pandemic world.
By contrast, other employers in the Square Mile and Canary Wharf have taken a more flexible approach, with the likes of Lloyds Banking Group telling staff they expect them back in the office for at least two days a week in April this year.
The insurers Aviva and Axa, the asset managers BlackRock and abrdn, and accounting and business services groups such as Deloitte, PwC and EY are all among those who have avoided ordering staff to return to the office five days a week.
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Implications to commercial property and beyond
That approach – and it very much looks to be the dominant one – will have massive implications for the commercial property sector.
It potentially leaves office owners with a surplus of space – even though recent business surveys by the likes of the property services group Savills suggest that demand for office space in central London is currently running at 10% ahead of its 10-year long-term average.
With the City and West End still pretty quiet on Mondays and Fridays – albeit not as quiet as they were during the lockdown period – it will also have implications for shops, bars and restaurants.
There are also implications for the owners of Canary Wharf itself.
The development, one of the most stunning urban regeneration projects achieved anywhere in the world during the last three decades, has been seeking to pivot away from financial services, the sector with which it is most strongly associated, into fields such as life sciences and the creative industries.
It has also begun offering residential space for the first time.
All of that was happening anyway. But the company – jointly owned by the Qatari government and the Canadian investment giant Brookfield – could still have done without HSBC moving on.
Another major Canary Wharf tenant, Credit Suisse, was also looking to sub-let some of its office space even before its rescue in March by local rival UBS.
Canary Wharf’s credit rating was downgraded at the end of last month by Moody’s.
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A run of wins for the City
By contrast, the City of London Corporation – which has slugged it out for decades with Canary Wharf for office tenants – will be cock-a-hoop at luring HSBC back to the Square Mile, particularly as the news comes weeks after Clifford Chance, one of the five “magic circle” law firms, announced it would be moving back to the City from the Wharf when its lease there expires in 2028.
Luring HSBC to its new development – the bank told employees today the site was its “preferred option” – will also be a coup for Orion Capital Partners, the private equity firm, which acquired BT’s old head office at 81 Newgate Street in 2019 and which has been rebuilding it since the latter moved east to Aldgate in 2021.
HSBC, whose lease on the tower expires in 2027, also reportedly considered Evargo Tower, a site being developed to the rear of Fleet Street’s River Court, the 1932 Art Deco building previously occupied by Goldman Sachs and before that, Express Newspapers, whose journalists nicknamed it the “Black Lubyanka”.
Also considered, apparently, was 175 Bishopsgate, the vast building near Liverpool Street station previously occupied by the European Bank of Reconstruction and Development (EBRD).
The opulence of that building, replete with its marble walls, led the EBRD to be nicknamed “the Glistening Bank” – a pun on the old “Listening Bank” slogan of Midland Bank, which ironically was later bought by HSBC.
To add to the irony, the EBRD has since moved to Canary Wharf.
Moving from a symbolic home
HSBC’s existing home has been symbolic to the bank for many years.
Designed by the award-winning architect Sir Norman Foster, it brought together employees from around 20 HSBC and Midland Bank sites dotted across the City of London, including the striking blue glass building at 10 Lower Thames Street and the neighbouring (and less glamorous) St Magnus House; the now-demolished Mariner House on Pepys Street near Tower Hill; Fountain House on Fenchurch Street; Watling Court on the corner of Cannon Street and Bow Lane and, most famous of all, the beautiful old Midland Bank Group headquarters at 27 Poultry, which is now a hotel and member’s club christened – in a nod to its architect Sir Edwin Lutyens – The Ned.
To that extent, the now 45-storey building was a big commitment on HSBC’s part, following its acquisition of Midland in 1992.
At its completion it was the second-biggest building in Europe – after Canary Wharf’s flagship first tower at nearby 1 Canada Square – and has continued to break records since.
When HSBC sold it in 2007, to the Spanish company Metrovacesa, it was the first building in the UK to change hands for more than £1bn.
The buyer ran into difficulty during the financial crisis and, in December 2008, HSBC bought it back – making a reported £250m profit on the original deal.
The following year, HSBC sold the building on to South Korea’s national pension service, again at a profit. The tower has been owned since 2014 by the Qatar Investment Authority.
Since then, it has also been at the heart of the perpetual debate at HSBC over whether or not to retain its global headquarters in the UK or move to Hong Kong, something it reviews on a triennial basis.
There was once a time when this seemed almost inevitable and that day may still come.
For now, though, the only move on the cards appears to be four-and-a-half miles west from Canary Wharf.
Rachel Reeves has been urged by a think tank to cut national insurance and increase income tax to create a “level playing field” and protect workers’ pay.
The Resolution Foundation said the chancellor should send a “decisive signal” that she will make “tough decisions” on tax.
Ms Reeves is expected to outline significant tax rises in the upcoming budget in November.
The Resolution Foundation has suggested these changes should include a 2p cut to national insurance as well as a 2p rise in income tax, which Adam Corlett, its principal economist, said “should form part of wider efforts to level the playing field on tax”.
The think tank, which used to be headed by Torsten Bell, a Labour MP who is now a key aide to Ms Reeves and a pensions minister, said the move would help to address “unfairness” in the tax system.
As more people pay income tax than national insurance, including pensioners and landlords, the think tank estimates the switch would go some way in raising the £20bn in tax it thinks would be needed by 2029/2030 to offset increased borrowing costs, flat growth and new spending commitments. Other estimates go as high as £51bn.
Torsten Bell appearing on Sky News
‘Significant tax rises needed’
Another proposal by the think tank would see a gradual lowering of the threshold at which businesses pay VAT from £90,000 to £30,000, as this would help “promote fair competition” and raise £2bn by the end of the decade.
The Resolution Foundation also recommends increasing the tax on dividends, addressing a “worrying” growth in unpaid corporation tax from small businesses, applying a carbon charge to long-haul flights and shipping, and expanding taxation of sugar and salt.
“Policy U-turns, higher borrowing costs and lower productivity growth mean that the chancellor will need to act to avoid borrowing costs rising even further this autumn,” Mr Corlett said.
“Significant tax rises will be needed for the chancellor to send a clear signal that the UK’s public finances are under control.”
He added that while any tax rises are “likely to be painful”, Ms Reeves should do “all she can to avoid loading further pain onto workers’ pay packets”.
The government has repeatedly insisted it will keep its manifesto promise not to raise income tax, national insurance or VAT.
A Treasury spokesperson said in response to the think tank report it does “not comment on speculation around future changes to tax policy”.
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Chancellor urged to freeze alcohol duty
Meanwhile, Ms Reeves has been urged to freeze alcohol duty in the upcoming budget and not increase the rate of excise tax on alcohol until the end of the current parliament.
The Scotch Whisky Association (SWA), UK Spirits Alliance, Welsh Whisky Association, English Whisky Guild and Drinks Ireland said in an open letter that the current regime was “unfair” and has put a “strain” on members who are “struggling”.
The bodies are also urging Ms Reeves “to ensure there will be no further widening of the tax differential between spirits and other alcohol categories”.
A Treasury spokesperson said there will be no export duty, lower licensing fees, reduced tariffs, and a cap on corporation tax to make it easier for British distilleries to thrive.
Leave retailers alone, Reeves told
This comes as the British Retail Consortium (BRC) warned that food inflation will rise and remain above 5% into next year if the retail industry is hit by further tax rises in the November budget.
The BRC voiced concerns that around 4,000 large shops could experience a rise in their business rates if they are included in the government’s new surtax for properties with a rateable value – an estimation of how much it would cost to rent a property for a year – over £500,000, and this could lead to price rises for consumers.
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Latest ONS figures put food inflation at 4.9%, the highest level since 2022/2023.
The Bank of England left the interest rate unchanged last week amid fears that rising food prices were putting mounting pressure on headline inflation.
“The biggest risk to food prices would be to include large shops – including supermarkets – in the new surtax on large properties,” BRC chief executive Helen Dickinson said.
She added: “Removing all shops from the surtax can be done without any cost to the taxpayer, and would demonstrate the chancellor’s commitment to bring down inflation.”
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