Conservative leader Kemi Badenoch will sound the alarm during a visit to Edinburgh’s finance sector, warning that higher bank taxes in the upcoming Budget would damage growth and the UK’s financial competitiveness. She joins leading investors who fear inevitable tax increases on banks by Chancellor John Healey on October 28. Badenoch’s shadow chancellor Andrew Griffith said Britain needs growth, but a raid on financial services would stifle it, urging Labour to back business and wealth creators instead.
Former Goldman Sachs chief economist Lord Jim O’Neill told MPs Healey might default to higher bank taxes to raise cash, though he personally opposes such moves and would prefer alternatives to capital gains tax increases. One major investor said higher bank levies are now highly likely in the City, noting that a profit surcharge increase of no more than 3 percentage points could actually trigger a bank share rally. UK banks currently face a 3% profit surcharge atop the 25% corporation tax, plus an annual balance sheet levy.
While rising interest rates have boosted bank profits recently, large investors warn higher levies could put the UK at a disadvantage versus other markets. Richard Marwood of Royal London Asset Management said the impact on investor sentiment could be considerable, while Niall Gallagher of Jupiter criticised the political class’s history of applying windfall taxes to unpopular industries, raising the cost of capital. Jarrid Klug of DWS added that tax rhetoric creates short-term uncertainty, reducing UK banks’ attractiveness relative to peers and likely leading to costs being passed to customers.
Source: Financial Times Companies · Summarized by HeadlinesBriefing