As WPP returns, will HSBC quit UK?

BBC business editor Robert Peston on Osborne's tax reforms

In a symbolic sense, it matters that Sir Martin Sorrell has decided that the government's corporation tax reforms and cuts are enough to lure his advertising giant back from Dublin to the UK.

The chief executive and founder of WPP told me: "We've now had a chance to read the small print. It is subject to drafting and enactment of the relevant legislation, and to board and shareowners' approval".

But he confirmed what he told the BBC's Today Programme - that overnight he made up his mind the Chancellor has done enough to bring the home of WPP back to London (last night on the Ten O'Clock News he applauded the reforms, but hadn't yet bought his ticket back from Dublin).

The government cannot contain its delight at WPP's decision - largely because its corporate tax changes are designed to make the UK a better place for multinationals to base themselves.

Those reforms aren't cheap. By the government's own estimates - and critics say they under-estimate the cost - they will lead to around £2bn of lost revenue a year by 2015 (and see my note from yesterday for more on the detail of the reforms to the so-called Controlled Foreign Company Rules, the taxation of multinationals' branches, and cuts in the rate of corporation tax).

For the avoidance of doubt, WPP's intentions don't constitute a trend. It is too early to say whether they will lead to the kind of investment and job creation in the UK by multinationals that the government desires.

We don't yet know whether Shire, the pharmaceuticals group, or UBM, the media company, will follow WPP's lead.

And it is unclear whether Sorrell's thinking has been influenced by the economic weakness of Ireland, which may ultimately undermine the new Irish government's ability to maintain low tax arrangements for multinationals that other EU members such as Germany want the Irish to scrap.

All that said, this morning George Osborne has had the kind of advertising from an advertising giant that money can't buy.

Of course, some may say that is because Sir Martin Sorrell is just one of the usual Tory suspects. But I don't think that's quite right: he was on reasonable terms with the last government. That said, he has been a supporter of the government's public spending cuts. And he is a member of David Cameron's business advisory group.

One more thing. There is a reasonable chance that if WPP comes back, like a giant ship in the night it may well pass HSBC - the giant international bank - travelling in the opposite direction.

It is not corporation tax that particularly irks HSBC but George Osborne's new levy on the banks. Emigration from the UK is a very live option, that comes up for discussion at every board meeting, I am reliably told.

The reason for HSBC's itchy feet, as I've mentioned here before, is that it is furious that George Osborne's new bank levy is applied to the money it borrows outside the UK, as well as its domestic liabilities. And that really matters, because HSBC has far more of its assets and liabilities outside the country than inside.

HSBC estimates that it could save itself more than £250m in levy every year by the simple expedient of moving its HQ for tax purposes somewhere else. And HSBC's directors tell me that the bank's shareholders - its owners - tell them that they don't see why HSBC should needlessly pay this tax, so are urging them to move their caravan on.

Now some of you - who don't seem to be fond of banks - might well say "good riddance". But the Treasury tells me it definitely wouldn't want to see HSBC go, though it doesn't seem to have a cunning plan to persuade it to stay.

You can keep up with the latest from business editor Robert Peston by visiting his blog on the BBC News website.

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