Parts of the Bank of England could be moved out of London to Birmingham under Labour plans to push investment into other parts of the UK.
The radical plan threatens the historic association of the Bank with Threadneedle Street in the City of London, where it has been based since 1734. The recommendation is part of an interim report into the UK’s financial system, led by the economist Graham Turner of GFC Economics and launched by the shadow chancellor, John McDonnell.
UK output from hi-tech industries has fallen on average over the past 10 years, says the report. Investment in manufacturing, ICT and other critical sectors is lagging £28bn behind investment in real estate companies, it says.
The report proposes moving some of the Bank’s functions to Birmingham and establishing offices in Glasgow, Cardiff and Belfast, with smaller regional offices in Newcastle and Plymouth.
The Bank would be sited close to the National Investment Bank and Strategic Investment Board secretariat and research department, organisations that Labour has said it will set up when it enters government, creating a new “economic policy hub” in Birmingham, possibly close to the railway station. Whether the governor would relocate to the city would be part of Labour’s policy review.
“This important report drums home the message that our financial system isn’t delivering enough investment across the whole country, and in the high-technology industries and firms of the future where it is needed most,” said McDonnell.
“Under the Tories, we’ve seen more and more investment flowing into property speculation whilst high-tech firms have been starved of the money they need, and research spending has lagged far behind.”
Turner said: “The pace [of] automation and technological change is accelerating, threatening established business models and creating an economy characterised by frequent ‘disruptive’ episodes. As a central bank sitting at the heart of the UK financial system, the Bank of England needs to be playing an active, leading role, ensuring banks are helping UK companies to innovate. Flow of funds analysis shows that banks are diverting resources away from industries vital to the future of this country.
“There is a risk that the disproportionate number of technology companies in London and the south-east will increase, exacerbating regional inequality. Governments have a critical role in addressing these weaknesses, but that will require determined, strategic action.”