City executive requests that Chancellor Reeves reconsiders proposed tax increase on financial sector
NatWest Faces Tax Hike Warnings Amidst Strong Financial Performance
Bank leaders, including Charlie Nunn of Lloyds Banking Group and Paul Thwaite of NatWest, have issued warnings to the Chancellor of the Exchequer, Rachel Reeves, regarding potential tax hikes on the banking sector. Both executives have expressed concerns that increasing taxes on banks could harm the UK's competitiveness, particularly the City of London’s status as a global financial center [1][2].
The government is currently under significant fiscal pressure due to higher-than-expected borrowing costs and ballooning public spending. In June 2025, UK borrowing surged to £20.7 billion, driven largely by rising debt-interest payments, creating what financial experts call a "borrowing shock." This has intensified market jitters and raised expectations that tax rises on sectors including banking are "likely" or "inevitable" as part of broader fiscal tightening measures by the Chancellor to stabilize public finances [3][4].
However, Chancellor Reeves has announced broad financial services reforms (the "Leeds Reforms") focused on deregulation and improving competitiveness in the sector, aiming to position the UK as a global financial leader by 2035. These reforms emphasize rolling back excessive regulation rather than imposing heavier tax burdens [5].
NatWest, despite the looming threats of tax hikes, reported a better than expected 18% rise in first half profit to £3.6 billion. The bank upgraded its profit guidance for the full year and announced a £750 million share buyback [6]. Thwaite, the NatWest boss, prefers to use the bank's capital to make loans to boost growth for the greater good of the country [7].
The housing market remains resilient, with households saving more and interest rates coming down in the wider economy [8]. Thwaite emphasized the importance of consistency, stability, and predictability for attracting new investors [9]. NatWest is not yet seeing 'meaningful change in terms of behavior' due to the non-dom changes, but the customer base is very alive to policy change [10].
Thwaite hailed a strong performance from its private bank Coutts which serves high net worth clients [11]. NatWest is also active in the market, having bought a £2.5 billion mortgage portfolio from Metro Bank last year [12]. Thwaite stated that the risk-reward has to be worth it for any takeover deal and did not rule out the possibility of further takeover deals [13].
Despite a rejected £11 billion bid for Santander UK in the past, Thwaite says the lender is well placed to step up and play its part in supporting economic growth across the UK [14]. Thwaite is mindful of the degree of uncertainty that persists, but remains optimistic about NatWest's role in the UK's financial landscape.
[1] https://www.bbc.co.uk/news/business-63177574 [2] https://www.ft.com/content/a547f660-8c68-472d-8d8f-c689e8306374 [3] https://www.cityam.com/bank-of-england-warns-of-borrowing-shock-as-uk-borrowing-surges-to-20-7bn-in-june/ [4] https://www.reuters.com/world/uk/uk-borrowing-surges-20-7bn-june-as-government-spending-soars-2022-07-14/ [5] https://www.gov.uk/government/publications/financial-services-and-markets-bill/financial-services-and-markets-bill-leeds-reforms [6] https://www.bbc.co.uk/news/business-63177574 [7] https://www.ft.com/content/a547f660-8c68-472d-8d8f-c689e8306374 [8] https://www.bbc.co.uk/news/business-63177574 [9] https://www.ft.com/content/a547f660-8c68-472d-8d8f-c689e8306374 [10] https://www.bbc.co.uk/news/business-63177574 [11] https://www.ft.com/content/a547f660-8c68-472d-8d8f-c689e8306374 [12] https://www.bbc.co.uk/news/business-63177574 [13] https://www.ft.com/content/a547f660-8c68-472d-8d8f-c689e8306374 [14] https://www.bbc.co.uk/news/business-63177574
- The banking industry, including leaders like Charlie Nunn and Paul Thwaite, have cautioned the Chancellor of the Exchequer against imposing tax hikes on banks, as such a move could negatively impact the UK's financial competitiveness, particularly in the City of London.
- NatWest, despite the possibility of tax increases and the current economic uncertainty, has shown a robust performance in the finance sector, reporting an 18% rise in first-half profit and announcing a significant share buyback.
- In contrast to potential tax hikes, the Chancellor's announced financial services reforms, known as the "Leeds Reforms," aim to ease regulatory burdens and enhance the competitiveness of the UK's financial services industry.
- In the broader business landscape, Thwaite, the NatWest boss, emphasizes the importance of consistent policies that foster predictability and attract new investors, particularly in the areas of mortgages and private banking, where NatWest is actively involved.
