Britain’s banking behemoths bled billions in value on Friday as a new tax idea, floated by a prominent thinktank, spooked investors and sent share prices into a dive. The combined market capitalisation of the sector’s biggest players was cut by over £6.4 billion in a single session of frantic trading.
The idea that caused the damage was a proposal from the IPPR for a windfall tax to reclaim profits banks have made from the quantitative easing (QE) policy. The report highlighted the £22 billion annual cost to the public purse from interest payments on bank reserves, arguing a new levy was needed to redirect these funds.
The market’s reaction was one of pure fear. The share prices of giants like NatWest, Lloyds Banking Group, Barclays, and HSBC all fell as the spectre of reduced profitability loomed. The sheer scale of the financial loss, £6.4 billion, underscores the profound impact the proposal had on investor sentiment.
While analysts conceded that banks are often seen as “easy political pickings,” they warned of the dangers of such a move. The key concern is that a tax that weakens the banking behemoths could also weaken their ability to lend, thereby harming the broader economy the government is trying to support.