عربي English Türkçe اردو فارسى
Logo
Latest News
Business

UK Banks Brace for Possible Tax Rise as Budget Nears

Barclays and HSBC buildings are seen in London, Britain October 20, 2020. REUTERS/Matthew Childs
Barclays and HSBC buildings are seen in London, Britain October 20, 2020. REUTERS/Matthew Childs
TT
TT

UK Banks Brace for Possible Tax Rise as Budget Nears

Barclays and HSBC buildings are seen in London, Britain October 20, 2020. REUTERS/Matthew Childs
Barclays and HSBC buildings are seen in London, Britain October 20, 2020. REUTERS/Matthew Childs

UK-based banks are stepping up lobbying efforts against possible tax hikes in the government's inaugural Budget on October 30, amid mounting worries it may tap the cash-rich sector to boost Britain's finances, senior industry sources told Reuters.
Finance minister Rachel Reeves is due to meet senior representatives of the banking sector in the coming days, where bankers expect a rise in taxes on lenders' profits will be discussed, two of the sources said.
So far neither Prime Minister Keir Starmer nor Reeves has said banks will be required to pay higher taxes, but Starmer's recent reference to the burden falling on those with “broader shoulders” has fueled concerns a policy change might be imminent, three sources said.
The sources, who declined to be named because of the sensitivity of the matter, said they anticipate the Treasury will seek to hike taxes by increasing an existing surcharge on profits that lenders already pay.
This plan would be easier for the finance minister to achieve than cutting the amount of interest UK banks earn on reserves parked at the Bank of England, a measure which could distort the effects of its monetary policy, the sources said.
HSBC, Britain's largest bank, posted a 78% rise in 2023 pretax profit to $30.3 billion pounds in February and domestic peers including NatWest Group and Barclays have posted similarly bumper returns.
According to the sources, UK banks are already taxed more aggressively than many other international rivals, and increasing the sector's costs via taxes could have an impact on the cost and availability of credit, the sources said.
The existing UK bank levy was introduced in 2011 to curb a crisis-era culture of excessive risk and reckless growth across the industry in the wake of the global financial crisis.
Shares in UK banks dipped briefly last week after the Financial Times quoted an unnamed former government official making the case for a “sensibly crafted” levy on banks that have enjoyed bumper profits on the back of higher interest rates.

Most Viewed

 
 
Business

Israel Central Bank Holds Rates

The Bank of Israel building in Jerusalem. Reuters
The Bank of Israel building in Jerusalem. Reuters
TT
TT

Israel Central Bank Holds Rates

The Bank of Israel building in Jerusalem. Reuters
The Bank of Israel building in Jerusalem. Reuters

The Bank of Israel kept interest rates unchanged on Wednesday for a sixth straight meeting, but raised the prospect of future rate increases should armed conflict on two fronts push inflation up more than expected.
The central bank - also worried about Israel's investor risk premium which has risen since the Gaza war began on Oct. 7 last year - left its benchmark rate at 4.50%.
"In view of the continuing war, the Monetary Committee’s policy is focusing on stabilizing the markets and reducing uncertainty, alongside price stability and supporting economic activity," the central bank said in a statement.
Policymakers expressed worries over rising inflation stemming largely from supply constraints related to the war with Hamas in Gaza and accelerating fighting with Hezbollah in Lebanon, saying the increase in the pace of inflation is broad, Reuters reported.
Israel's annual inflation rate rose to 3.6% in August from 3.2% in the previous month, moving further above the government's 1%-3% target range after falling as low as 2.5% in February.
Bank of Israel Governor Amir Yaron told a news conference after the decision that the future direction of interest rates was "data dependent.”
Prior to the war, rates - which rose rapidly in 2022 and 2023 - were expected to decline this year. The central bank had reduced its key rate by 25 basis points in January but it has been on hold since due to the war, rising inflation pressures, a widening budget deficit and the higher risk premium.
Some investors have begun to speculate that inflation will continue to rise and possibly push the central bank to raising rates again.
"If inflation rises at a faster rate than we predicted ... we can definitely raise the interest rate," Yaron said, noting the inflation rate is expected to gain in near term.
Yaron said the current level of rates is believed to be restrictive enough to ultimately bring inflation back to within its target.
He added that in the current period Israel's uncertainty is far greater than what the US and European central banks - which have started to loosen policy - are experiencing.
The decision to hold rates steady came despite the bank's research department slashing its forecast for Israeli economic growth this year to 0.5% from a previous estimate of 1.5%.
The economy grew an annualized 0.7% in the second quarter, slowing markedly from a 17.2% pace in the first quarter.
All 14 analysts polled by Reuters had expected no rates move on Wednesday.
The central bank's researchers raised their inflation forecast for the coming year to 3.2% from 3.0%, while the interest rate is projected at its current 4.5% level, rather than 4.25% predicted in July.
The staff raised their expectation for Israel's 2024 budget deficit to 7.2% of gross domestic product from 6.6% due to the extra funds needed to finance the military conflicts. They see a 4.9% of GDP deficit in 2025.
"Approval of a responsible budget for 2025 is an essential component in strengthening the international markets’ trust and maintaining the economy’s robustness," Yaron said.
The budget's passage has been delayed due to political infighting.
The rates decision was initially slated for Monday but was moved to not coincide with the Oct. 7 anniversary of the start of the Gaza war.