The way Rachel Reeves told it last November after her budget, it seemed to be a done deal that JP Morgan would build a 279,000 sq metre (3m sq ft) tower in Canary Wharf to serve as its European headquarters. The chancellor was “thrilled” the Wall Street bank had chosen London and hailed “a multibillion-pound vote of confidence in the UK economy and this government’s plans for growth”.
And, to be fair to Reeves, Jamie Dimon, JP Morgan’s big boss, also presented the plan as final. “The UK government’s priority of economic growth has been a critical factor in helping us make this decision,” he said.
One did not have to be overly cynical to wonder whether Dimon had waited to give the green light until Reeves had confirmed her tax-raising budget would not introduce fresh levies on banks. After all, the Financial Times reported that the prime minister’s business envoy, Varun Chandra, had travelled to New York a few days before the budget to reassure the bank over the government’s pro-business stance. But, hey, at least London would get this £3bn office housing 12,000 JP Morgan staff.
Except, it turns out, the negotiation is not quite complete. JP Morgan, a bank that made net income of $57bn (£43bn) in 2025, would like a discount on its business rates, according to documents produced by the local Tower Hamlets council. How much?
Well, the Treasury is proposing “up to 100%” over “a period of years”, which could mean hundreds of millions of pounds since, under normal undiscounted conditions, the site is estimated to generate up to £1.6bn in rates over 25 years. The documents say the bank is “unlikely to progress” the project “without clarity and certainty”. Thus the government “has formally requested that the council present a range of viable options for delivering a lawful and fiscally responsible business rates incentive”.
One can take the view that argy-bargy over sweeteners is par for the course for the sort of mega-development. One assessment, touted by JP Morgan, naturally, says the project would add almost £10bn to the UK economy over six years and create about 7,800 construction-related jobs. Like it or not, those are hefty statistics to plonk on the negotiating table.
All the same, the fact that the vehicle for a sweetener is business rates will rightly infuriate all those pubs, restaurants and hospitality business that were clobbered by the same tax in Reeves’s budget. One proposal imagines bending the system out of shape to create an enterprise zone around JP Morgan’s development to enable time-limited business rates discounts.
But it requires little imagination to see where the power lies in this negotiation. JP Morgan will a get a deal it doesn’t really need because it would be far too embarrassing for the Treasury to see this investment slip between the cracks. Financial services, remember, is one of the eight chosen sectors of the government’s “modern” industrial strategy. We can only hope the government tells us eventually how many millions this “multibillion-pound vote of confidence” ends up costing.
Source:
www.theguardian.com
