Bob Diamond, the man once described by Peter Mandelson as "the unacceptable face of banking", has warned that Barclays could leave the UK if it is unhappy with the coalition's eventual banking reforms. Sky News's business editor Mark Kleinman reveals that Diamond told the bank's shareholders that "It's no longer a question of whether Barclays wants to stay in the UK but whether the UK wants Barclays."
So, why the confrontational language? Well, there's just over a month to go until the Vickers Commission delivers its final report on banking, and the commission is likely to recommend that banks' high-risk investment arms should be ring-fenced from their retail operations. This reform, endorsed by George Osborne in his Mansion House speech, would (in theory) allow investment banks to fail without needing to be bailed out by the state.
At the time, it seemed as if Osborne had hit upon a neat compromise, one that was acceptable to both the banks and the Lib Dems. But it's no longer looking so simple. Vince Cable, for instance, used a recent speech to make it clear that he still favours a full Glass-Steagall-style separation, while the banks are increasingly anxious that any reform will make it harder for them to raise capital. Now, added to this combustive mix, is Diamond's threat to move Barclays' headquarters abroad.
Of course, Diamond's threat may be an empty one (and the government should call his bluff) but that won't stop it being taken seriously by the Treasury. Having declared that Britain is "open for business", Osborne will be desperate to avoid anything that suggests the reverse is true. The $64,000 question is whether he can do so, while simultaneously appeasing the Lib Dems. Cable, who has long believed that the banks require "fundamental surgery", has said that he will only accept a ring-fence on the condition that it can be "as effective as a full separation" and that it can be introduced at "a lower cost". Should Vickers fail to pass these tests, it's likely that the Business Secretary, emboldened by his victory over Rupert Murdoch, will consider all responses, up to and including his "nuclear option". Osborne will need all of his guile and cunning to identify a solution that all sides are prepared to tolerate.