Concerns raised over impact of further taxation on lending and investment
The chief executive of Lloyds Banking Group has warned the Labour government that further taxation on banks could limit lending to households and businesses.
Speaking to Sky News during a regional investment summit, Charlie Nunn (pictured top) urged Chancellor Rachel Reeves to disregard proposals for a windfall tax on commercial banks, despite the sector reporting record profits.
“If we are going to have the ability and the confidence to continue to lend into the real economy, to help households and businesses invest, we need to make sure that the financial services system and Lloyds Banking Group really remains healthy in that context,” Nunn said.
The UK’s four largest banks—HSBC, Barclays, Lloyds, and NatWest—recorded combined profits of nearly £46 billion last year. This has led to speculation that banks may face increased taxation in the upcoming budget. Reeves is reportedly considering raising the bank surcharge, which is applied in addition to corporation tax. The surcharge was reduced from 8% to 3% in 2023. Restoring it to its previous level could generate an estimated £2 billion, while a separate windfall tax has been suggested as a means to raise up to £8 billion.
Nunn warned that such measures could weaken the banking sector’s ability to support the wider economy. “Obviously, taxes are a matter for the government to look at,” he told the news network. “But it’s definitely one of the factors that impact our ability to support the real economy in the UK.”
Barclays CEO C.S. Venkatakrishnan also expressed strong opposition to plans for higher taxes on UK banks, warning that these measures could result in lower lending and job losses across the sector.
In addition, the banking industry is also contending with significant costs arising from the car finance mis-selling scandal. Lloyds, which has significant exposure, has allocated nearly £2 billion for potential compensation under the Financial Conduct Authority’s (FCA) redress scheme.
The FCA’s initiative aims to address cases where lenders did not disclose broker commissions, resulting in some customers paying more for car finance than necessary. Up to 14.2 million customers could be eligible for compensation, with an average payout of £700 each.
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.
