Major British banks experienced a significant boost in their stock prices on Tuesday as market confidence grew that Chancellor Rachel Reeves would spare the financial sector from additional taxation in her upcoming budget announcement. The surge came after reports suggested the Treasury had requested supportive statements from banks regarding the budget, signaling they might escape further fiscal burdens.
Leading high street lenders saw impressive gains, with Lloyds climbing 3.8%, NatWest rising 3.7%, and Barclays adding 2.3% to their share values. Market analysts attributed this upward momentum to growing expectations that previously discussed tax measures targeting the banking sector would not materialize in the budget. The positive market response reflects months of uncertainty that had weighed on banking stocks.
The speculation around potential bank taxation has been a contentious issue since August, when policy experts suggested implementing a new levy to reclaim funds that commercial banks earn from the Bank of England through quantitative easing programs established after the 2008 financial crisis. The banking industry mounted a vigorous campaign against such measures, presenting data showing UK banks already face a total tax rate of approximately 45.8% when including employment taxes and VAT, significantly higher than competitors in Frankfurt at 38.6% and New York at 27.9%.
Banking executives warned that additional taxation could undermine recent regulatory reforms designed to stimulate economic growth. They argued that increased tax burdens might force them to reduce lending activities, directly contradicting the chancellor’s Leeds reforms launched over the summer, which aimed to boost growth by easing regulatory constraints on financial institutions. The industry’s concerns appeared justified as the debate intensified throughout recent weeks.
Despite the apparent reprieve, pressure from campaigners continues. Advocacy group Positive Money has collected nearly 69,000 signatures supporting a windfall tax on bank profits, proposing a 38% charge similar to that imposed on energy companies, which they estimate could generate over £14 billion for public finances. Several Labour MPs, including Simon Opher from Stroud, are championing this cause, arguing that recouping payments to the banking sector represents a fair approach to funding essential public services that have suffered from years of budgetary constraints.