Major hedge fund set to leave London for lower Swiss taxes

A major hedge fund today revealed plans to relocate its headquarters from London as banking giant HSBC said it was reviewing its position.

Krom River, which has £453 million in assets, said it was moving to Switzerland, known for its low tax regime.

The fund is one of the few to perform well in the credit crunch and would see its partners' income tax rate fall from 40 per cent to 10 per cent with the switch to the small town of Zug, south of Zurich.

The move makes the firm the latest to quit London for lower tax regimes.

It came as HSBC fuelled fears of an exodus of leading companies. Three FTSE250 firms disclosed last month that they were leaving London.

The disclosure by Britain's biggest bank that it was reviewing having its headquarters in London will heap more pressure on the Government to end uncertainty over its tax policies.

Key tax concerns include government proposals to begin taxing "non-domiciled" foreign staff.

The current review by HSBC, which is based in a 44-storey tower at Canary Wharf housing 8,000 staff, is being conducted by its board, led by executive chairman Stephen Green.

The bank carries out a similar review every three years and experts believe a decision by HSBC to relocate its head office is unlikely. But the board's findings will be scrutinised across the City.

HSBC's status as one of Britain's largest corporate taxpayers means its decision on whether to stay in London is said to be "of huge significance for the Government". The bank's overall tax bill last year was about £750 million.

An HSBC spokesman confirmed: "A company of HSBC's scale periodically reviews a range of issues in the interests of competitiveness and its shareholders (including its) head office location. It is our opinion that London remains a crossroads of the world, both geographically and culturally, and we have no current plans to relocate our head office."

As well as tax, London's business leaders believe issues such as the capital's creaking transport infrastructure, frequent delays at Heathrow and soaring living costs are among reasons why the city is becoming less attractive to multinational firms. Corporation tax is another crucial consideration.

The Government recently cut the tax from 30 per cent to 28 per cent, but it is still much higher than countries such as Ireland, where firms pay 12.5 per cent. Jeff Postlethwaite, of the London Chamber of Commerce, said today: "There has been an increasingly difficult business environment out there for the last few months and that's continuing. But we haven't heard of any of our member companies looking to go elsewhere."

HSBC switched its headquarters from Hong Kong to London in 1993, coinciding with the integration of Midland Bank, which it bought the year before. In an interview last year, Mr Green said he saw no pressing need to relocate HSBC's head office again.

He said: "We do formally every three years or so look at the question of where is the right place to base the head office of a group like this ... Tax is a factor, but so are a number of other factors. Ever since 1992, and I see no reason that this is going to change as of now, the answer has been London. I think London is the leading international financial services centre of the world."