Shares in UK banks are experiencing declines amid speculation that the upcoming autumn budget may include additional taxes targeting the banking sector. Leading this downturn are NatWest, down 3.7%, Lloyds Banking Group with a 2.8% drop, and Barclays, falling 2.3%. Concerns have been raised regarding Chancellor Rachel Reeves possibly implementing measures to bolster public finances, which may include a new tax on bank profits.
The think tank IPPR has suggested a “Thatcher-style tax on bank windfalls” as a potential measure, arguing that it could generate substantial revenue for public services. The IPPR indicates that the UK government is currently compensating the Bank of England for losses stemming from its quantitative easing program, which is now being unwound. They report that these losses could cost the government £22 billion annually and advocate for taxing bank reserves associated with quantitative easing.
Carsten Jung from IPPR remarked that current policies have inadvertently funneled taxpayer money to commercial banks. He supports a targeted levy to rectify the perceived flaws in quantitative easing implementation.
In light of these concerns, financial analysts are monitoring developments closely. The Financial Times has cited City sources, noting worries of a possible banking sector tax increase. One individual commented on the likelihood of MPs seeking additional revenue from financial services, with banks appearing to be a principal target.
Despite these pressures on bank shares, a broader look at the UK economy reveals contrasting trends, including a rise in business confidence reported by Lloyds, indicating resilience in various sectors. However, the potential introduction of new taxes looms over the financial landscape, leaving many to question the future stability of financial markets.
Source: https://www.theguardian.com/business/live/2025/aug/29/uk-business-confidence-rises-economy-fears-stock-market-bonds-inflation-business-live-news-updates