SOME of the major US banks are understood to be drawing up preliminary plans to move certain operations from London to Ireland amid concerns about the widening divide between the UK and Europe.

A newspaper report has quoted sources as saying Bank of America, Citigroup and Morgan Stanley were considering Ireland as a favourable location if they needed to shift operations.

Plans are said to be at an early stage but attention is being focused amid deepening plans for a banking union and the possibility that the UK exits the European Union following a promised referendum.

Ireland could prove to be an obvious alternative location given the fact that it has direct access to the eurozone, is English speaking and is known for its low corporation tax rate.

According to the report in the Financial Times, there are fears among some executives at US banks that when the European Central Bank takes over as direct banking supervisor later this year, a wedge will be driven between the UK and the rest of Europe's financial system.

British Prime Minister David Cameron has promised to renegotiate Britain's relationship with the EU ahead of a referendum on membership by 2017 if his Conservatives win next year's UK general election.

While British business lobbyists have said the EU needs reform, many are worried an EU exit may close British businesses off from the 500 million person single market.

The prospect of Britain quitting the club that it joined in 1973 also worries many in the City of London, the financial centre that accounts for roughly one-tenth of the British economy, because it would lose out were trading to move to Frankfurt or elsewhere.

Britain's new Foreign Secretary Philip Hammond last month reiterated his position from two years ago that if Britain does not get a good renegotiation of its relationship with the, it should leave the bloc.

He said that if the EU failed to change and to agree to new terms for UK's membership, he would rather the country left.

Mr Hammond said his government would put it to the British people to decide once there is substantive renegotiation and substantive change in Europe that addresses the concerns that UK has. (Additional reporting Reuters)

Irish Independent