London-listed banks fall on tax fears
Investors took fright at reports that the government could raise taxes on UK banks, sending their shares sharply lower.
NatWest and Barclays were among the biggest fallers in the FTSE 100, with their shares down 3.3 per cent and 2.7 per cent, respectively, wiping hundreds millions of pounds each from their stock market values.
Shares in Lloyds Banking Group, Britain’s biggest mortgage lender, dropped as much as 3.3 per cent at one point during the day before paring some of the losses to close down 1.7 per cent.
The spectre of higher taxes on the banking sector was sparked by the prime minister when he said in a speech from Downing Street’s rose garden on Tuesday: “There’s a budget coming in October and it’s going to be painful… Those with the broadest shoulders should bear the heavier burden.”
After Sir Keir Starmer’s speech, the government was quick to reiterate its pledge not to raise the 25 per cent rate of corporation tax.
Dan Coatsworth, an investment analyst at AJ Bell, the stockbroker, said: “No one is going to shed any tears if the banks are forced to hand over more of their profits. It’s about as easy a target as you can get.
“Banks have made big money from higher interest rates, profiting when the rest of the country has struggled through a cost of living crisis.”
However, analysts at Citigroup, the US investment bank, said a government levy on banks “strikes us as somewhat less likely, having been the subject of pushback from the chancellor pre-election”.
Simon French, chief economist at Panmure Liberum, the investment bank, said: “We would be surprised if there is not a list of tax increases that the chancellor will, or will not, introduce.” He added, however, that making definitive predictions about where or on which sectors Rachel Reeves might impose higher taxes was “something of a fool’s errand”.
