The Old Lady of Threadneedle Street could take up residence in Birmingham under a Labour government © PA
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Labour is considering relocating most of the Bank of England to Birmingham if it wins power at the next general election, a move that would shake up more than three centuries of association between the Old Lady and the City of London.
Consultants commissioned by John McDonnell, the shadow chancellor, have concluded that the central bank’s base in Threadneedle Street is “unsatisfactory and leads to the regions being underweighted in policy decisions.”
They have recommended moving “some functions” to Birmingham, to be located “next door or close to” the National Investment Bank and Strategic Investment Board, organisations that Labour plans to create on entering government. Labour’s policy review will include whether the governor should also be based in Birmingham.
“All three, side-by-side, would constitute a new ‘economic policy’ hub,” said an interim report by consultants GFC Economics and Clearpoint Corporation Management.
The report suggested moving the BoE’s premises “close to” Birmingham’s main train station, saying a relocation would “provide a clear, visible example of a new government’s determination to promote growth and a rebalancing of the economy”.
Mr McDonnell said the “important report drums home the message that our financial system isn’t delivering enough investment across the whole country”.
Birmingham has already started attracting some of the City’s financial institutions. HSBC is making final preparations to open its new UK retail headquarters in Britain’s second city in the new year. The office move, which is costing £200m, will employ 4,000 staff in the city in total.
Birmingham has become symbolic of the Tory party’s attempts to win over Labour heartlands. The surrounding West Midlands region voted for Brexit last year, and elected a Conservative metropolitan mayor, former John Lewis boss Andy Street, in May. But the Conservatives only won back one seat in the region from Labour in the June general election.
Birmingham is also one of the potential homes for part or all of Channel 4, which Theresa May’s government has promised to move out of London. The publicly-owned broadcaster has resisted the change, arguing that advertisers and programme suppliers tend to be based in the capital.
Moving the Bank of England to Birmingham would create similar objections, given that its primary stakeholders are mainly located in the capital. GFC/ Clearpoint’s interim report also calls for the Bank to create new regional branches in Glasgow, Cardiff and Belfast — adding to its current network.
GFC/Clearpoint’s interim report, which will be considered by Mr McDonnell and other Labour policymakers, also said that the Bank of England’s mandate should be reviewed. It said that the Financial Policy Committee “is ignoring investment”, due to its focus on systemic risks, and “makes no distinction between unproductive and productive lending.”
Mr McDonnell wrote in 2015 that the Monetary Policy Committee’s mandate should change, for example so that it could target nominal gross domestic product, instead of focusing on inflation. But last October he pledged to protect the central bank’s “sacrosanct” operational independence, after Theresa May and other senior Conservatives had appeared to criticise the effect of quantitative easing.
The Bank of England was set up in 1694 as a private bank in Cheapside, and moved to its current base in Threadneedle Street in 1734. Its current location has created some practical problems, with the gold vault impinging on Bank underground station below.
Labour, which has an uneasy relationship with British business, is currently at level pegging with the Conservatives in the opinion polls.