The Bank of England could be moved to Birmingham under a Labour Government, Shadow Chancellor John McDonnell has revealed.

And it would be joined by two major new financial institutions, making Birmingham the UK's economic policy "hub".

The aim would be to ensure the needs of regions are given more weight when policy decisions are made, and reduce the dominance of London.

Consultants commissioned by Mr McDonnell recommended moving "some functions" of the Bank of England to Birmingham, close to New Street station.

This could include moving the office of the Governor of the Bank, currently Mark Carney, to Birmingham.

Bank of England
The Bank of England's current home in London

And the Bank would be joined by a new National Investment Bank, which would raise finance of £500bn for investment in infrastructure and lending. Under Labour's plans, around £350bn would come directly from the Treasury, and this would be used to attract private sector investment too.

The National Investment Bank would lead a series of regional investment banks across the country.

Birmingham would also be home to the secretariat and research department of a new Strategic Investment Board. The Board would include the Chancellor, Secretary of State for Business and the Governor of the Bank of England, and it would co-ordinate the promotion of investment, employment and higher wages.

Together, the three bodies would turn Birmingham into one of the UK's financial heartlands. Birmingham is already attracting some top financial institutions, and HSBC bank will officially open its new UK retail headquarters in Arena Central, near Broad Street.

An interim report by consultants GFC Economics and Clearpoint Corporation Management, commissioned by Mr McDonnell, said: "All three, side-by-side, would constitute a new ‘economic policy’ hub, possibly close to the main train station (Birmingham New Street).

"Relocating institutions to Birmingham should provide the opportunity to upgrade the regional railway networks.

"Birmingham has a population of 1.124m. According to the 2011 Census, the population of the West Midlands metropolitan area was 5.602m. Restructuring core Bank of England responsibilities will help to provide a counterweight to the dominance of London."

Shadow Chancellor John McDonnell
Shadow Chancellor John McDonnell

And it said moving the Bank of England would "provide a clear, visible example of a new government’s determination to promote growth and a rebalancing of the economy".

Under the proposals, the Bank of England would also have offices in Glasgow, Cardiff and Belfast, and smaller regional offices in Newcastle and Plymouth.

Mr McDonnell said: "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.

"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.

"Labour is committed to working with our financial institutions to help deliver the financing that the fourth industrial revolution will need, as part of our ambitious plans to help build a high-tech, high-wage economy that works for the many, not the few."

Graham Turner, Chief Economist, GFC Economics, 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."

The Bank of England has long been associated with the City of London and is sometimes known as the Old Lady of Threadneedle Street, after its London location.

Becoming the Bank's new home is likely to encourage more financial service firms to come to the city.

Birmingham is also bidding to become the new home of Channel 4, and HS2 high speed rail trains are due to begin running between Birmingham and London in 2026.

Other proposed changes include reforming the Bank of England’s mandate, which is currently to aim for 2% inflation. A new mandate could include trying to ensure wages increase, the report says.