UK bank shares slip on reports of a tax increase in the October budget
Barclays, Lloyds and NatWest fell between 0.2% and 1.8% after reports that the banks could face higher taxes in the October 28 budget.
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what happened
British bank stocks edged lower on Friday after a media report said finance minister John Healey was preparing to tax the banks in his October 28 budget. The report said the move is part of an effort to keep deficit reduction plans on track.
Analysts covering the banks said one option open to Healey is raising the 3% surcharge that banks pay on their profits. In early trade, Barclays, Lloyds and NatWest were down between 0.2% and 1.8%, while euro zone banks rose 0.9%.
why it matters
For investors, the key question is how large an increase in the profit surcharge could be, since that determines the hit to the banks' earnings. The gap with euro zone lenders suggests the market is already pricing in risk specific to the UK sector, though clarity will only come once the budget is published.
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