Shares in Lloyds Banking Group PLC (LSE:LON:LLOY) and Barclays PLC (LSE:LON:BARC) were down 3.4% and 1.34% respectively in Wednesday’s early deals amid reports the new chancellor Jeremy Hunt is plotting a new round of windfall taxes targetting banks and energy companies as he seeks to plug gaps in government finances.
The new windfall tax threat comes as investors await UK banks reporting on their third quarter performance, starting next week with HSBC Holdings PLC (LSE:LON:HSBA).
In London, Lloyds shares were down 1.46p or 3.44% changing hands at 41.14p whilst Barclays dipped 1.29% to 145.6p, and, NatWest Group PLC (LSE:LON:NWG) was down 2.11% at 231.7p.
Hunt sees the bumper profits being made in the City due to rising interest rates and by energy companies due to soaring oil and gas prices as a method of plugging what is estimated to be a £40bn fiscal shortfall, so says the FT.
At a cabinet meeting yesterday, Hunt said “eye-wateringly difficult" decisions lay ahead and to keep credibility among financial markets tight spending control was required and possibly even larger cutbacks.
David Postings, chief executive of UK Finance, the financial services industry trade body said: “We urge the government to consider the surcharge very carefully and not put at risk the competitiveness of the UK’s banking and finance industry".
Two-thirds of [finance] jobs are outside London, he added.
As part of his mini-mini-Budget, Hunt also scrapped a cut in income tax but a planned cut to national insurance was retained.
How much money a bank surcharge extension would raise depends on the profitability of the banks, but analysts have predicted strong third-quarter numbers when they report figures next week.