The City of London financial district at sunrise.
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Bank chiefs in London are calling for greater policy clarity and stability amid fears that looming tax hikes in the forthcoming U.K. budget could hit the financial services sector.
Speaking with CNBC’s Steve Sedgwick and Ritika Gupta in London’s Canary Wharf district on Wednesday, CEOs from Barclays, Citi and J.P. Morgan said the U.K. had successfully weathered the upheaval brought about by U.S. President Donald Trump’s tariff turmoil in April, with financial services since seeing stronger corporate profitability and an improved deal-making environment.
However, they also expressed caution ahead of potential tax rises in Finance Minister Rachel Reeves’ Autumn Budget, scheduled for Nov. 26.
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Over the summer, it was widely reported that Reeves was considering a bank windfall tax to shore up a multibillion-pound hole in the public finances.
“Competition is an important part of growth, which is why actually milking the financial sector is not good, because it stifles investment,” said Barclays CEO C.S. Venkatakrishnan.
“It stifles competition, stifles growth. We are sitting in the financial heart of London. London is one of the two great financial centers of the world. You need to encourage it to grow, not tax it out of existence.”
Venkatakrishnan told CNBC the U.K. government has been “generally on the right track”.
But with the country likely facing higher taxes than other countries, he warned that “a harmonious, consistent approach to bank regulation, bank capitalization, including bank taxation” is critical in ensuring institutions remain competitive.
“The world is our oyster, the U.K. is our home, and we’ve got to work with both,” he said.
Conor Hillery, deputy CEO and head of investment banking, EMEA, at J.P. Morgan, said investors and companies want greater certainty when it comes to making investment decisions, planning, and acquisitions.
“Stability of policy and certainty are at a premium in certain parts of the world relative to others,” Hillery told CNBC in an interview on Wednesday, noting the increasingly extreme polarization of politics in other countries.
He said London remains “the premier capital market in Europe”, adding that improved deal activity in the U.K. has strengthened optimism in recent months, aided by economic resilience globally and comparatively strong corporate profitability following the U.S. tariff turmoil in the spring.
“In London in particular, we have seen over the last number of months, a growing number of companies looking to list in the U.K.,” Hillery said, describing the recently-announced £150 billion ($202 billion) of investment from U.S. companies as a “vote of confidence in the U.K.”
Also speaking to CNBC in Canary Wharf on Wednesday morning was Citi U.K. CEO Tiina Lee, who said markets were “impatient” for reforms and clarity.
Lee argued that Reeves recognized the key role that banks played in Britain’s growth picture, but noted that any legislative changes would take time to come into effect.
“The chancellor has been extremely vocal over the steps that need to be taken in order to maintain London’s competitiveness as a global financial center,” she said.
The U.K.’s drive to remain competitive comes against pressure for Reeves’ office to resolve a budgetary deficit of £62 billion ($83.5 billion), which has triggered speculation over the government opting for a swathe of further potential tax increases. Britain’s economic growth flatlined in the month of July, after second-quarter gross domestic product expanded by 0.3%.
Back in July, the government presented proposals to make the U.K.’s financial services sector more competitive, touting London as “one of only two truly global financial centers.” The proposals included reforming regulation, deepening ties with various markets from the U.S. and China to the EU and the Middle East Gulf states, fostering a culture of retail investment and increasing funding for research in the sector, particularly for AI development.
“I think it’s been very clear that the government, and particularly the chancellor, has really put financial services at the heart of growth in the in the U.K. economy,” Lee added, noting that the financial services sector contributes 10% of Britain’s tax income.
Asked whether Citi’s clients were looking to leave the U.K. to get ahead of any tax hikes, Lee responded: “We’re not hearing that.”
Acknowledging the challenging financial situation, Lee said clients want the U.K. to remain a stable and competitive tax regime. “That is the key message that we continue to deliver to government,” she added.
Financial services providers are not alone in their tax worries. An estimated 10,000 millionaires left London in 2024 to escape a new tax regime focused on the city’s “non-dom” super rich.