Shares of the UK’s largest banks fell sharply on Wednesday amid concerns that the new Labour government may raise taxes on the sector in the upcoming October Budget.
NatWest and Barclays were among the biggest decliners on the FTSE 100, with their shares dropping by as much as 4.1% and 3.7%, respectively, erasing over £1 billion from each company’s market value.
Lloyds Banking Group, the UK’s largest domestic lender, saw its shares decrease by up to 3.3%.
Shares in Asia-focused banks HSBC and Standard Chartered also experienced declines of up to 0.8% and 1.5%, respectively.
The market reaction followed Keir Starmer’s first major speech as Prime Minister on Tuesday, in which he stated that those “with the broadest shoulders should bear the heaviest burden” in addressing what Labour claims is a £22 billion shortfall in public finances left by the previous Conservative government.
Before the general election, Chancellor Rachel Reeves’ spokesperson had stated that there were “no plans” to raise the surcharge on bank profits or implement a financial transaction tax.
However, recent strong profits in the banking sector have led to speculation that banks may be targeted for further taxation, including a possible windfall tax.
Lloyds, HSBC, Barclays, and NatWest collectively posted a record £44.2 billion in pretax profits last year, a 41% increase from £31.4 billion in 2022, driven by interest rate hikes from the Bank of England that allowed them to charge more on loans.
Additionally, data published by the Treasury Committee in May revealed that big banks earned more than £9 billion in interest on their central bank reserves last year, a 135% increase from 2022.
“There are banks that have been profiting from higher interest rates – they have broad shoulders and no one likes banks,” a former senior Whitehall adviser told the Financial Times on Tuesday.
Influential lobby groups like TheCityUK have strongly opposed a windfall tax on banks, arguing that it would make the UK less competitive as a financial hub by deterring businesses and investors.
Non-profit advocacy group Positive Money reported in February that a windfall tax on the profits of the Big Four banks could raise between £3.5 billion and £14 billion.
Other options available to Labour include increasing the capital gains tax rate to align it with income tax. Reeves has not explicitly ruled out such a measure.
City A.M. has reached out to the Treasury for comment.Source link
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Shares of the UK’s largest banks fell sharply on Wednesday amid concerns that the new Labour government may raise taxes on the sector in the upcoming October Budget.
NatWest and Barclays were among the biggest decliners on the FTSE 100, with their shares dropping by as much as 4.1% and 3.7%, respectively, erasing over £1 billion from each company’s market value.
Lloyds Banking Group, the UK’s largest domestic lender, saw its shares decrease by up to 3.3%.
Shares in Asia-focused banks HSBC and Standard Chartered also experienced declines of up to 0.8% and 1.5%, respectively.
The market reaction followed Keir Starmer’s first major speech as Prime Minister on Tuesday, in which he stated that those “with the broadest shoulders should bear the heaviest burden” in addressing what Labour claims is a £22 billion shortfall in public finances left by the previous Conservative government.
Before the general election, Chancellor Rachel Reeves’ spokesperson had stated that there were “no plans” to raise the surcharge on bank profits or implement a financial transaction tax.
However, recent strong profits in the banking sector have led to speculation that banks may be targeted for further taxation, including a possible windfall tax.
Lloyds, HSBC, Barclays, and NatWest collectively posted a record £44.2 billion in pretax profits last year, a 41% increase from £31.4 billion in 2022, driven by interest rate hikes from the Bank of England that allowed them to charge more on loans.
Additionally, data published by the Treasury Committee in May revealed that big banks earned more than £9 billion in interest on their central bank reserves last year, a 135% increase from 2022.
“There are banks that have been profiting from higher interest rates – they have broad shoulders and no one likes banks,” a former senior Whitehall adviser told the Financial Times on Tuesday.
Influential lobby groups like TheCityUK have strongly opposed a windfall tax on banks, arguing that it would make the UK less competitive as a financial hub by deterring businesses and investors.
Non-profit advocacy group Positive Money reported in February that a windfall tax on the profits of the Big Four banks could raise between £3.5 billion and £14 billion.
Other options available to Labour include increasing the capital gains tax rate to align it with income tax. Reeves has not explicitly ruled out such a measure.
City A.M. has reached out to the Treasury for comment.
