Mayor of London Sadiq Khan has called on the capital's largest banks to keep investing in the UK, ahead of an anticipated tax increase on the sector in this week's Budget. On Monday, he described the City's banking sector as "really important" but stopped short of opposing the tax raid, stating that "those with broader shoulders carry the greatest burden".
Expected banking surcharge rise
Chancellor Healey is expected to target the sector with a tax grab when he delivers his Budget statement on Wednesday. An increase to the UK banking surcharge, which is levied on top of corporation tax, is anticipated to be amongst the Budget's most significant revenue-raisers. The surcharge currently stands at three per cent, bringing banks' total corporation tax rate to 28 per cent, but raising it to eight per cent is projected to generate approximately £2bn.
The Chancellor has been warned that a raid on banks could jeopardise the City's global standing. Jamie Dimon, chief executive of JP Morgan, has previously cautioned that higher taxes could prompt him to "reconsider" constructing his bank's new megatower in Canary Wharf, as reported by City AM.
Khan urges continued investment
However, the Mayor urged banks not to reduce investment in London. He said: "The financial sector is really important to London. The City of London area is very important to London."
"Hundreds of thousands of jobs are created in the financial sector, including the banks. I want them not just to stay here, but I want banks to come here as well. I'm really pleased that JP Morgan Chase are investing in a huge new building in Canary Wharf. We've seen Goldman Sachs move here, and others move here as well. That's really important," he added.
The Mayor's office is amongst signatories of a memorandum of understanding that clears the path for JP Morgan to receive a substantial business rates discount on its tower. The scheme is anticipated to inject £10bn into the local economy.
London's contribution and high street concerns
This week's Budget is set to establish the framework for Andy Burnham's commitment to stimulate growth across the UK's regions, raising concerns that London's economic contribution could be sidelined. However, Khan maintains London "could pay more" in tax. He said: "It's not London versus the rest; it's London with the rest as well. As a capital city, every year we contribute net between £40bn and £50bn."
"I think we could do even more with the right support from the government. But I think our ecosystem relies upon everyone doing well in this city," he added. On Sunday night, Oxford Street was shut to traffic for the first time in its centuries-long history. Khan said City Hall's broader initiative to revitalise the high street will strengthen flagship stores like John Lewis and drive out "dross" American candy shops.
High street retailers argue the business rates system unfairly penalises them compared with online shopping giants like Amazon, Shein and Temu. During his campaign to secure the Makerfield parliamentary seat, Burnham pledged to increase taxes on "out of town" warehouses in order to finance tax relief for high street retailers. Healey has since dismissed the prospect of a tax raid on warehouses, following warnings from industry leaders that such a move would drive up costs for retailers and ultimately result in higher prices for consumers.
However, the Mayor of London argued that online retailers ought to be contributing more in tax. He said: "It's not a level playing field, and so I'm looking forward to the Chancellor addressing that. It can't be right that you've got a shopkeeper having to pay business rates, rent, salaried staff, people to serve customers, and those who are warehouse retailers don't."
