Bank Shares Fall Amid Speculation of Increased Tax Surcharge
Chancellor poised to deliver Budget this month as industry warns against economic consequences of potential profit tax hike.
Carla Rooney
Shares in major UK banks dropped on Friday amid widespread speculation of an impending tax hike.
Shares for Lloyds Banking Group, NatWest, and Barclays plummeted as reports surfaced regarding the Chancellor's plan to reverse former Chancellor Jeremy Hunt's reduction in the bank profit surcharge. Lloyds Banking Group had seen a 20% increase in the past 12 months.
Trades Union Congress (TUC) general secretary Paul Nowak endorsed these plans. He urged the Chancellor to push the surcharge to 16 percent. The union claims this higher rate could generate £24 billion in tax revenues over four years.
UK Finance, a prominent lobby group, dispatched a letter to John Healey and the prime minister on October 12th. The letter warned of severe economic repercussions from increased bank taxes. Andrew Griffith stated, "Britain needs growth. But a raid on the financial services sector will stifle it. Labour should be backing businesses and wealth creators, not making their lives even harder."
Short trades across the four largest UK banks surged by 58% week-on-week, according to data from IG. The UK's four largest lenders—HSBC, NatWest, Barclays, and Lloyds—reported £29.2 billion in profits during the first six months of the year, with £13.7 billion pledged to investors.
The Treasury lost £6 billion in corporate tax receipts since the bank surcharge cut in 2023, TUC analysis reveals. The Institute for Public Policy Research recommended generating £1 billion from a temporary surcharge on commercial banks' windfall profits as part of a package to raise an additional £16 billion for struggling households.
The International Monetary Fund advised the UK to consider targeting savings on pensions and welfare rather than increasing taxes on banks. This counsel emerges as government borrowing costs soared. The UK's tax-to-GDP ratio sits around 40%, an historically high level.
Rachel Reeves pitched London as a potential new home for UBS in discussions with the bank’s chair Colm Kelleher during her tenure as chancellor. The government attempted to persuade UBS to shift its headquarters and stock market listing to London if the bank relocated out of Switzerland.
The Chancellor will deliver his Budget this month. A Treasury spokesperson stated, "As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals."
As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.