Key facts
- UK bank shares fell on Friday, reducing market value by £6.4bn.
- NatWest shares dropped nearly 5%, Lloyds Banking Group fell over 3%, Barclays was down 2%, and HSBC shares declined nearly 1%.
- The Institute for Public Policy Research (IPPR) proposed a new tax on large banks.
- The proposed tax targets 'windfalls' from quantitative easing and interest on reserves.
- The IPPR estimates current policies lead to a £22bn annual loss to public finances.
UK bank shares experienced a significant decline on Friday, with their combined market value dropping by over £6bn. This downturn was prompted by a report from the Institute for Public Policy Research (IPPR) advocating for a new windfall tax on major lenders in the upcoming autumn budget. The IPPR's proposal aims to recover profits banks have gained from quantitative easing and the subsequent interest accrued on reserves held at the Bank of England. The report highlights that the current system results in an annual £22bn loss to public finances. Analysts expressed concerns that such a tax could hinder the UK's pro-growth agenda and might be an 'easy political pickings' for the government to address a potential £40bn fiscal shortfall.