One concern among bankers are mooted plans under current finance minister Jeremy Hunt to collect more tax from banks – with a decision set to be made by the time fiscal plans are laid out on Oct 31.
Business groups have long argued for tax cuts, saying that the country has an uncompetitive tax system for banks, with both a levy on balance sheets and a tax surcharge.
Sunak’s elevation to the top job has relieved some of the nervousness around the outlook for the UK economy, boosting domestic markets and easing borrowing costs, according to analysts.
“There’s a huge amount of concern in the City that the UK’s reputation for sound policymaking has been damaged, but there is scope now for a reset,” said William Wright, CEO of think tank New Financial.
It is widely expected Sunak will keep Hunt as his finance minister, who was appointed late in Truss’ brief premiership to shore up confidence in Britain’s finances – and tear up much of her planned tax-cutting agenda.
One London-based senior banker at a global bank said they were hopeful they would not have to spend as much time explaining Britain’s political turmoil to international colleagues.
The Conservative party’s actions – along with the Bank of England’s earlier intervention to calm bond markets – showed Britain had “built-in mechanisms to correct itself” that would provide some reassurance internationally, the person added.
PRE-EXISTING PLANS
Sunak said shortly after becoming prime minister in a speech outside 10 Downing Street that he wanted to build an economy that “embraces the opportunities of Brexit”, hinting that more deregulation could be on the cards.
Britain’s £164 billion (US$185 billion) financial industry was largely locked out of directly serving EU customers after Brexit.
Exports of financial services from Britain to the EU fell 19 per cent in cash terms between 2018 and 2021, according to parliamentary research published last month, compared to a 4 per cent growth in exports to non-EU countries over that period.
Sunak – a former Goldman Sachs analyst and hedge fund partner – has previously outlined his thinking on the finance sector in some detail, with a new bill that is now going through parliament.
It introduces regulation on stablecoins and easing capital rules for insurers, along with giving regulators a new competitiveness objective. The industry is pressing for speedy implementation.
“Delivering on the secondary objective for the financial regulators to promote growth and international competitiveness in the Financial Services and Markets Bill will support this agenda,” said Chris Hayward, policy chairman at the City of London Corporation, which runs the ‘Square Mile’ financial district.
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