UK banking shares fell significantly on Friday. Investors reacted to new calls for a bank profit tax. The Institute for Public Policy Research (IPPR) proposed the levy. Consequently, major banks saw their share prices decline. NatWest and Lloyds led the losses. Both dropped more than 4% in morning trading.
The left-leaning think tank argues for this new bank profit tax. They claim it could raise up to £8 billion annually. This money would offset taxpayer costs from quantitative easing (QE). The Bank of England’s QE program is currently costing £22bn a year. The IPPR describes these losses as a hidden subsidy to commercial banks.
Bank executives have already voiced strong opposition. Lloyds CEO Charlie Nunn called potential tax rises inconsistent. He said they conflict with goals to boost the UK economy. Furthermore, the financial services body UK Finance agrees. They warn a new bank profit tax would harm Britain’s competitiveness.
The Treasury, however, declined to comment on tax speculation. A spokesperson reiterated the government’s support for the financial sector. They emphasized plans to make the UK the top destination for financial services by 2035.
The proposed tax adds pressure on Chancellor Rachel Reeves. She faces difficult budgetary decisions. Her self-imposed fiscal rules require careful balancing. The government recently narrowed its budget headroom. This followed reversals on welfare savings and winter fuel allowances.
Investment director Russ Mould noted the market’s concern. Investors fear the proposal threatens future profits and shareholder returns. The debate over a potential bank profit tax is likely to continue. It highlights the tension between raising revenue and promoting economic growth.
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