HSBC's HQ is staying put, was it ever really going to move?

How likely was HSBC to move its global headquarters back to Hong Kong? Credit: Reuters

The euphoric reaction to HSBC's decision to remain headquartered in London suggests the decision was in some doubt.

Surely the surprise would have been a move back to Hong Kong, where the Hong Kong and Shanghai Banking Corporation was born 150 years ago.

HSBC suggests the board thrashed around and agonised, but what did it have to gain?

It would have avoided the Chancellor's bank levy, saved itself a bit of tax and been closer to its biggest markets - but the benefits looked slim.

For a start, the regulator in Hong Kong has a reputation for being scrupulous, so it's not as if HSBC would have had been in for an easier ride on capital requirements.

The main problem, though, would have been HSBC's size.

HSBC is Britain's biggest bank, and the ninth largest in the world - the bank's balance sheet is almost ten times the size of Hong Kong's economy.

In extremis, who would act as lender of last resort? The Hong Kong Monetary Authority hasn't pockets deep enough.

The Chinese government? We've seen how hands-on China can be recently, intervening to prop-up the falling stock-market.

For any bank that values its independence, that's cause for alarm.

HSBC will remain headquartered in the UK Credit: PA

Back in Britain and the Treasury sees only upside - HSBC's decision is proof the UK is "the best place to base a global business" and a "vote of confidence in the government's economic plan".

They are reasonable opinions. Another is that Chancellor George Osborne has just swallowed what was essentially a bluff.

The Chancellor hiked the bank levy, a tax on bank balance sheets, just before the election.

It was a popular move, but one that prompted HSBC - one of the few banks not to find itself perilously over-extended during the banking crisis - to threaten to up-sticks because it felt it was paying a disproportionate amount of tax.

In July, George Osborne announced the bank levy would be reduced and would only apply to the UK balance sheet of banks.

He introduced a bank surcharge on profits to help make-up the revenue lost.

The net effect was a reduction in the amount of tax HSBC pays while increasing the burden for others .

"HSBC has no intention or moving," a rival bank executive told me recently.

"Only a crazy person would relocate their bank headquarters to the territory of a communist country that makes people disappear," they said in reference to the recent detention of three booksellers in Hong Kong.

George Osborne took HSBC's threat to relocate seriously Credit: PA

The Chancellor clearly took the threat seriously.

Crudely put, at the end of the day this was a decision about where to locate around 200 people and hold board meetings.

There was some tax, a bit of pride and prestige at stake, but HSBC's economic activity in the UK would have continued as normal.

HSBC is globally important - one tenth of the world's trade passes through it - and it will remain headquartered in Britain.