Key facts
- UK Chancellor John Healey is considering raising bank taxes in the October 28 budget.
- The potential tax hike could reverse cuts to the bank surcharge, raising it to 8% from 3%.
- This measure is expected to generate over £2 billion annually.
- UK Finance warned that increased bank taxes would harm competitiveness and investment.
- Short trades on major UK banks increased significantly ahead of the budget announcement.
- The banking sector represents nearly 20% of the FTSE 100 index.
UK Chancellor John Healey is reportedly planning to increase taxes on the banking sector as part of the upcoming budget on October 28. This move is intended to help address damage to public finances, exacerbated by increased borrowing costs and geopolitical events. One proposed measure involves reversing previous cuts to the bank surcharge, potentially raising it from 3% to 8%, which could generate over £2 billion annually. Banks have voiced concerns that higher taxes would negatively impact their competitiveness, investment, and job creation. Data indicates that traders are increasingly betting against major UK banking stocks, with short trades rising significantly, and some domestic banks have already seen modest share price declines. Analysts suggest that much of this risk may already be priced into current valuations.