UK competitiveness being eroded, bankers warn
The British Bankers Association (BBA) has warned that the UK’s attractiveness as an international banking center is being eroded, and has called on the Government to review the tax treatment of the sector, reports Tax News.
The BBA said that urgent action is needed if the UK is to remain an attractive location for foreign banks and provide a competitive business environment for UK wholesale banks to challenge competitors overseas. The report highlighted what the BBA described as a number of worrying trends, including an eight percent reduction in employment in the sector since 2011, and a 12 per cent drop in assets in the UK sector over the same period. Return on equity for the wholesale industry has fallen and will continue to fall, and activities linked to capital formation will decrease, it says.
The BBA called on the Government to review the timeframe over which the bank levy can be removed. In his July Budget, Chancellor George Osborne announced plans to reduce the bank levy from January 1, 2016, with reductions being made each calendar year until 2021. After 2021, the levy will no longer apply to worldwide balance sheets. The BBA said that the Government should bring forward to the current parliament (which will be dissolved in 2020) the effective date for a move to taxing only UK liabilities.
The Summer Budget also provided for the introduction of an eight percent surcharge on bank profits. The BBA said Osborne should indicate whether the surcharge can be seen as a temporary counterbalance to historically low UK corporation tax receipts. If so, the surcharge could be reduced as corporation tax receipts increase.
Anthony Browne, BBA Chief Executive, said: “We have now reached a watershed moment in Britain’s competitiveness as an international banking center. The balance of push and pull factors, including tax and capital treatment, unilateral and extraterritorial regulation, and overall uncertainty, are weighing heavily in boardrooms across the industry. Many international banks have been moving jobs overseas or deciding not to invest in the UK. Our report today shows we cannot be complacent.”
