Shares in major UK lenders jumped on Tuesday as investors grew increasingly confident that the sector will avoid further tax increases in Wednesday’s Budget. NatWest rose 3.7%, Lloyds climbed 3.8%, and Barclays added 2.3%, buoying the FTSE 100.
The gains followed reports that the Treasury had asked banks to issue supportive statements ahead of the Budget, signalling that Chancellor Rachel Reeves is unlikely to impose a new sector-specific levy. Speculation about such a tax has circulated since August, when the IPPR thinktank proposed clawing back profits banks earn from quantitative easing.
The industry lobbied hard against any increase, arguing that UK banks already pay a total tax rate of about 45.8% when employment taxes and VAT are included, compared with 38.6% in Frankfurt and 27.9% in New York. Banking bosses also warned that a tax rise could curb lending and undermine the government’s Leeds reforms, which aim to cut regulatory burdens.
Fears were reignited earlier this month after the Treasury abandoned plans to raise income tax rates, prompting concerns that a bank levy could be considered instead. However, a Financial Times report overnight suggested the Treasury had sought positive soundings, easing those worries. Dan Coatsworth of AJ Bell noted that intense lobbying may have paid off, though he cautioned that “U-turns have been a theme in UK politics for some time”.
Campaign groups and some Labour MPs continue to push for a windfall tax, with Positive Money saying it has gathered 68,749 signatures in support. A 38% charge on bank profits, similar to the energy windfall tax, could raise more than £14bn, the group claimed. Labour MP Simon Opher said the Budget offered “an opportunity to restore the public services that form the backbone of our society” and urged the government to listen to those calling for a fairer economy.
