Banks breathe a sigh of relief as Britain's Conservatives win shock election victory. But the financial services industry remains concerned about a referendum which could see Britain leave the EU. Kirsty Basset reports.
Relief, perhaps, for London's business community, with the Conservatives, often perceived as 'business friendly' set to form Britain's next government. Bank shares, led by Lloyds, surged early on Friday. So too did the market value of British banks - it increased by 9 billion pounds. Dominic Johnson is CEO of Somerset Capital Management. (SOUNDBITE)(ENGLISH) CEO OF SOMERSET CAPITAL MANAGEMENT LLP, DOMINIC JOHNSON, SAYING: "The banks that are state-owned breathed a sigh of relief because the Conservatives are preceived to be, probably rightly so, better stewards of the financial services sector. And ultimately in general the attitude the Labour party took before the election was surprisingly anti-business." A Labour government would have increased the bank levy, based on banks' assets, by 800 million pounds a year. That won't be happening now. But a Conservative win may still not stop banks like HSBC from leaving London. The bank has been a vocal critic of the regulations and extra taxes imposed on British banks since the financial crisis. And it's due to make a decision on whether to change domicile in coming months. (SOUNDBITE)(ENGLISH) CEO OF SOMERSET CAPITAL MANAGEMENT LLP, DOMINIC JOHNSON, SAYING: "HSBC would do well to stay here. We are still the global financial capital of the world, whatever happens." Another reason driving a potential move, is the threat of Britain leaving the EU. The Conservatives have promised a referendum in 2017 on the issue. BGC market analyst, Mike Ingram, says it is a threat - but still more attractive than the alternative. (SOUNDBITE)(ENGLISH) BGC MARKET ANALYST MIKE INGRAM SAYING: "To some extent it's a sword of Damocles hanging over business. But as I say if the trade off was between near term uncertainty between a Labour-SNP type accommodation this morning or a Conservative majority or minority government, clearly the market is voting for the latter." Despite the uncertainty a referendum would cause, some are hopeful it wouldn't necessarily mean an exit. (SOUNDBITE)(ENGLISH) EO OF SOMERSET ASSET CAPITAL MANAGEMENT, DOMINIC JOHNSON, SAYING: "I still think Britain will be contented to be part of a trading bloc that has clearly benefitted us. And as a businessman, I wouldn't like to see us pull out of a reformed Europe." David Cameron is expected to unveil his demands for EU reform at a summit in Brussels next month.