Amidst a period of robust corporate profitability and a flourishing deal-making environment, London’s top bankers are urging the government for greater clarity and stability in its economic policies, voicing concerns that impending tax increases in the upcoming UK budget could dampen the financial services sector’s current momentum.
The UK had successfully navigated the disruption caused by US President Donald Trump’s tariff issues in April, CNBC quoted CEOs from Barclays, Citi, and JP Morgan in a report.
Since then, the financial services sector has experienced increased corporate profitability and a more favorable deal-making landscape.
Concerns about economic policies
Caution was expressed, however, regarding potential tax increases in Finance Minister Rachel Reeves’ Autumn Budget, set for November 26.
Reports indicated throughout the summer that Reeves was contemplating a windfall tax on banks to address a multi-billion-pound deficit in public funds.
“Competition is an important part of growth, which is why actually milking the financial sector is not good, because it stifles investment,” Barclays CEO C.S. Venkatakrishnan was quoted in the CNBC report.
It stifles competition, stifles growth. We are sitting in the financial heart of London. London is one of the two great financial centers of the world. You need to encourage it to grow, not tax it out of existence.
He cautioned that a unified and consistent approach to bank regulation, capitalization, and taxation is essential for institutions to remain competitive, especially as the country may face higher taxes than other nations.
UK’s financial sector resilience
According to Conor Hillery, JP Morgan’s deputy CEO and head of investment banking, EMEA, both investors and companies are seeking greater certainty when making decisions related to investments, planning, and acquisitions.
London, according to him, maintains its position as “the premier capital market in Europe.”
He further noted that renewed optimism has been fueled in recent months by improved deal activity in the UK, supported by global economic resilience and robust corporate profitability, particularly after the US tariff issues in the spring.
Hillery highlighted a recent increase in companies seeking to list in the UK, particularly in London. He also noted the recently announced £150 billion ($202 billion) investment from US companies, calling it a “vote of confidence in the UK.”
The UK is striving to maintain its competitive edge amidst a £62 billion ($83.5 billion) budgetary deficit that Shadow Chancellor Reeves’ office needs to address.
This deficit has led to speculation about potential new tax increases. In July, Britain’s economic growth stalled after a 0.3% expansion in the second quarter’s gross domestic product.
Government proposals and tax issues
In July, the government put forward proposals aimed at boosting the competitiveness of the UK’s financial services sector, asserting London’s position as “one of only two truly global financial centers.”
These proposals encompassed regulatory reform, strengthening connections with diverse markets including the US, China, the EU, and the Middle East Gulf states, cultivating retail investment, and increasing research funding within the sector, with a specific focus on AI development.
“I think it’s been very clear that the government, and particularly the chancellor, has really put financial services at the heart of growth in the in the UK economy,” the CNBC report quoted Citi UK CEO Tiina Lee in the report.
Lee recognised the difficult financial climate, stating that clients desire the U.K. to maintain a stable and competitive tax system.
That is the key message that we continue to deliver to government.
Tax concerns extend beyond financial service providers. In 2024, approximately 10,000 millionaires departed London, seeking to avoid a new tax system targeting the city’s “non-dom” super-rich.
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