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UK bank shares fall as City fears budget tax raidShares in UK banks are falling this morning as the sector fears it could be targeted in the autumn budget.NatWest (-3.7%), Lloyds Banking Group (-2.8%) and Barclays (-2.3%) are leading the fallers on the FTSE 100 share index, reflecting rising concerns that chancellor Rachel Reeves could target banks to help shore up the UK’s public finances.The IPPR think tank is this morning proposing that Rachel Reeves should levy a new bank tax. They argue that a “Thatcher-style tax on bank windfalls” could raise billions for public services.The IPPR points out that the UK government is currently spending billions of pounds a year compensating the Bank of England for losses on its quantitative easing programme, which is now being unwound.The BoE is also paying out higher interest rates on banks’ reserves than it is receiving on the bonds it still owns through QE.In total, these losses amount to a £22bn-a-year hit to the public finances, according to the IPPR, which is calling for the Treasury to tax the big banks on their QE-related reserves.Carsten Jung, associate director for economic policy at IPPR, said:
“The Bank of England and Treasury bungled the implementation of quantitative easing. What started as a programme to boost the economy is now a massive drain on taxpayer money. Public money is flowing straight into commercial banks’ coffers because of a flawed policy design. While families struggle with rising costs, the government is effectively writing multi-billion-pound cheques to bank shareholders.
“This is not how QE was meant to work – and no other major economy does it this way. A targeted levy, inspired by Margaret Thatcher’s own approach in the 1980s, would recoup some these windfalls and put the money to far better use – helping people and the economy, not just bank balance sheets.”
The Financial Times reports that fears are growing in the City of London that Reeves could announce a surcharge on the banking sector’s profits, or a new bank levy.One City figure told the FT:
“We aren’t stupid. There’s a bunch of Labour MPs, including Angela Rayner, who are looking for ways to get more money. Financial services are an obvious target.”
ShareKey eventsShow key events onlyPlease turn on JavaScript to use this featureNumber of unemployed people in Germany passes 3 million markGerman chancellor Friedrich Merz (left) meeting French president Emmanuel Macron before a Franco-German cabinet meeting in Toulon today Photograph: Manon Cruz/EPAOver in Germany, the number of unemployed people has hit three million for the first time in a decade.A total of 3.02 million people were unemployed in August in seasonally unadjusted terms, with an increase of 46,000 in the number of people out of work from the previous month.Labour office head Andrea Nahles says:
“The labor market is still shaped by the economic slump of recent years.”
If you account for seasonal factors, though, the number of unemployed decreased by 9,000 to 2.96 million.Even so, the rise in joblessness intensifies the pressure on chancellor Friedrich Merz to reform and stimulate the German economy.Speaking in France today, Merz responded to the data:
“The rise in unemployment is not unexpected. However, the figure illustrates how necessary reforms are for more growth and employability. The German government will focus on this.”
Share£7bn wiped off UK banksThe bank share selloff has gathered pace.NatWest are now down 4.7%, followed by Lloyds (-4.5%) and Barclays (-3.7%), with HSBC down a more modest 0.5%.By my maths, this wipes around £7bn off the value of the UK’s Big Four banks.ShareUK stock market ends week on ‘sour note’ amid bank tax fearsThe drop in bank shares has pulled down the wider London stock market.The FTSE 100 share idex is down 25 points, or 0.27%, at 9192 points this morning“The UK stock market ended the week on a sour note amid suggestions that the government could help to fill its fiscal hole with a new tax on the banking sector,” says Russ Mould, investment director at AJ Bell, adding:
“Some of the biggest names in the FTSE 100 are lenders so if they’re out of favour on the stock market, it acts as a drag on the whole UK blue-chip index.
“NatWest, Lloyds and Barclays were the FTSE 100’s biggest fallers on Friday morning as investors wondered if the era of bumper profits, dividends and buybacks is now under threat.
“These companies have enjoyed a strong run on the stock market in recent years, and they’ve also played an important role in lending money to small and large businesses which helps to create jobs and support the UK economy.
“The timing of the tax debate, fuelled by a report from think-tank IPPR, is unfortunate given it coincides with a new poll from Lloyds suggesting a rise in business confidence, despite cost pressures. This positive sentiment could be threatened if businesses take the view that a new tax on banks might force lenders to tighten their lending criteria.
ShareP&O Ferries have confirmed that CEO Peter Hebblethwaite is resigning, explaining:
“Peter Hebblethwaite has communicated his intention to resign from his position as Chief Executive Officer to dedicate more time to family matters. P&O Ferries extends its gratitude to Peter Hebblethwaite for his contributions as CEO over the past four years.“During his tenure the company navigated the challenges of the COVID-19 pandemic, initiated a path towards financial stability, and introduced the world’s first large double-ended hybrid ferries on the Dover-Calais route, thereby enhancing sustainability. We extend our best wishes to him for his future endeavours.”
ShareSky: Controversial P&O Ferries boss Hebblethwaite to quitSky News are reporting that Peter Hebblethwaite, the chief executive of P&O Ferries, is leaving the company.Hebblethwaite, who was voted the “Worst Boss in the World” by trade unionists in 2022, has reportedly resigned for personal reasons.Hebblethwaite attracted heavy criticism in 2022 after P&O controversially fired 800 crew without warning, and replaced them with low-paid agency staff working longer hours.He subsequently receivd a pay rise of at least 55%.ShareIndia’s rupee hits record low after Trump doubles tariffsIndia’s currency has sunk to a record low, on fears that US tariffs will hurt its economy.The rupee has dropped by -0.7% today to 88.23 rupees to the dollar, its weakest level on record.India’s rupee against the US dollar Photograph: LSEGTraders sold the rupee after Washington imposed an additional 25% tariff on Indian goods this week, doubling the total duties faced by the South Asian nation to 50%, as a penalty for buying Russian oil.The tariffs, which came into effect just after midnight on Wednesday in Washington, risk inflicting significant damage on the Indian economy and further disrupting global supply chains.ShareDefence stocks rise after Germany’s Merz says Putin-Zelenskyy summit won’t happenWith bank shares sliding, investors are piling into defence stocks instead.Babcock (+1.4%), Melrose (+0.95%) and BAE Systems (+0.7%) are all among the FTSE 100 risers, as optimism over a breakthough in the Russia-Ukraine war fades.German chancellor Friedrich Merz told reporters last night that there was “obviously” not going to be a meeting between President Zelenskyy and President Putin, despite Donald Trump’s push for a peace deal.ShareBloomberg’s Paul J Davies isn’t convinced by the IPPR’s call for a windfall tax on the banks.Posting on Blue Sky, he argues that it would be paid out of the interest that would otherwise go to savers, suggesting it could actually function as a “backdoor wealth tax”.But Davies also questions how much money new bank taxes would raise, posting:
They are also talking again about a special extra profit tax for banks – Rayner suggested upping total take from 28% to 30%. Do you know how much this will raise? Based on OBR forecasts it would bring in an extra
£275m per year.
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ShareKathleen Brooks, research director at XTB, fears the swirl of budget rumours could hurt confidence (undermining the rise in morale this month).She explains:
The decline in UK shares are led by the banks, which are all weighing on the FTSE 100 as rumours swirl of yet another tax rise, this time a windfall tax on lenders. Financials are down 1% on Friday, led by a 3% drop for NatWest, a 2.5% drop in Lloyds and a 2% fall for Barclays. The drip feed of potential tax rises to be included in this budget have dominated the papers this month, however, so far, the FTSE 100 has been resilient to this. However, now that it seems Rachel Reeves is going after the FTSE 100’s big hitters like banks, this could weigh on the index as we lead up to the Autumn budget.
US stocks outperformed their European peers in August, with the S&P 500 rising by 2%, compared to a 0.8% gain for the FTSE 100. This gap could widen, especially if we get the expected interest rate cuts from the Federal Reserve this year, at the same time as the UK government seems focused on squeezing businesses and consumers with multiple tax increases later this year, which is eroding confidence and dimming UK growth prospects further.
ShareUK banks are under pressure, reports Richard Hunter, head of markets at interactive investor.He explains:
Overnight weakness in sterling would normally support the FTSE 100 given its proliferation of overseas earnings, but reports of a potential windfall tax on the banks more than offset any hopes of a bright open.
The domestic banks were worst hit, with NatWest and Lloyds losing around 3%, while the more diversified groups such as Barclays and HSBC limited losses to around 1%. Unfortunately, any such rumours are likely to have an exaggerated impact given the government’s obvious need to raise more income in an attempt to mitigate its financial difficulties.
ShareUK bank shares fall as City fears budget tax raidShares in UK banks are falling this morning as the sector fears it could be targeted in the autumn budget.NatWest (-3.7%), Lloyds Banking Group (-2.8%) and Barclays (-2.3%) are leading the fallers on the FTSE 100 share index, reflecting rising concerns that chancellor Rachel Reeves could target banks to help shore up the UK’s public finances.The IPPR think tank is this morning proposing that Rachel Reeves should levy a new bank tax. They argue that a “Thatcher-style tax on bank windfalls” could raise billions for public services.The IPPR points out that the UK government is currently spending billions of pounds a year compensating the Bank of England for losses on its quantitative easing programme, which is now being unwound.The BoE is also paying out higher interest rates on banks’ reserves than it is receiving on the bonds it still owns through QE.In total, these losses amount to a £22bn-a-year hit to the public finances, according to the IPPR, which is calling for the Treasury to tax the big banks on their QE-related reserves.Carsten Jung, associate director for economic policy at IPPR, said:
“The Bank of England and Treasury bungled the implementation of quantitative easing. What started as a programme to boost the economy is now a massive drain on taxpayer money. Public money is flowing straight into commercial banks’ coffers because of a flawed policy design. While families struggle with rising costs, the government is effectively writing multi-billion-pound cheques to bank shareholders.
“This is not how QE was meant to work – and no other major economy does it this way. A targeted levy, inspired by Margaret Thatcher’s own approach in the 1980s, would recoup some these windfalls and put the money to far better use – helping people and the economy, not just bank balance sheets.”
The Financial Times reports that fears are growing in the City of London that Reeves could announce a surcharge on the banking sector’s profits, or a new bank levy.One City figure told the FT:
“We aren’t stupid. There’s a bunch of Labour MPs, including Angela Rayner, who are looking for ways to get more money. Financial services are an obvious target.”
ShareDollar on track for 2% fall in AugustIn the financial markets, the US dollar is on track to record a 2% monthly drop as traders anticipate Donald Trump will soon get his way on interest rate cuts.The dollar index, which measures the U.S. currency against six major peers, is slightly higher this morning but still course for a 2% decline for the month.The index is down around 10% this year, hit by anxiety over US economic policy as Trump’s trade wars pushed investors towards alternative assets.Trump’s attempts to remove Lisa Cook from the Fed board, and his plans for a replacement for chair Jerome Powell, show that the White House is determined to push for lower interest rates.Deutsche Bank told clients this morning:
Investors remain heavily focused on the Federal Reserve’s independence, and today there’s going to be an emergency hearing about Lisa Cook’s position on the Board of Governors that’s due to start at 10am EST.
So this is going to be critically important for markets, as her removal would give President Trump the opportunity to refashion the Board of Governors in a more dovish direction.
ShareUK companies are also eyeing up more price rises.In August, the net balance of firms expecting to raise prices over the next year was up four points to 65%. 67% (from 65%) of firms said they would raise prices in the coming year, while those anticipating price reductions fell slightly to 2% (from 4%), Lloyds says.ShareThere’s good news for workers, too, in the latest business barometer.Wage growth expectations increased by four points, with 38% forecasting average pay increases of 3% or more. Firms expecting to increase wages by 4% rose five points to 23%, while those forecasting 5% or higher also climbed five points to 12%.That would help employees handle the rise in UK inflation, which hit 3.8% in July. But it might concern the Bank of England, where some policymakers fear that increased earnings could lead to a further rise in prices…ShareUpdated at 07.48 BSTBusinesses across five of the UK’s twelve regions and nations saw a rise in confidence in August, but the increase was not universal.London, the East of England and the West Midlands saw strong improvements this month. However, firms in Wales were less confident, with a fall of 13 points, Lloyds reports.ShareUK business confidence rises despite jitters over economyGood morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.Despite the tides of gloom lapping the UK economy, business confidence has pushed up this month.The latest poll of business morale from Lloyds Banking Group shows that British businesses’ confidence in their trading prospects has hit the highest level since 2014, after rising sharply this month.According to Lloyds, manufacturers’ confidence is the highest in a decade – welcome news for the government as chancellor Rachel Reeves and her team work on the autumn budget.Retailers’ confidence also increased, to a five-month high, but construction confidence fell to a four-month low.Interestingly, the Lloyds Business Barometer has found that hiring intentions increased for the fourth month in a row, despite cost pressures.That indicates many businesses are coping with the £26bn increase in employers’ national insurance announced by Reeves last year, and the latest increase in the minimum wage.Economic optimism edged down for the first time since April, though, indicating increased jitters about the economic outlook.Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, explains:
“This continued upward trend in business confidence suggests UK firms remain optimistic about their own trading prospects while there is a modest cooling of confidence in the wider UK economy. Firms are focusing on what they can control, with many looking to pursue growth opportunities, including entering new markets and adopting new technologies.
“Wage expectations have seen a notable shift this month, but it remains to be seen whether this signals the start of a sustained trend or a temporary uplift, as they have been broadly stable in recent months.”
A chart of Lloyds business confidence Photograph: LloydsThe agenda
7.45am BST: French GDP and consumer spending data
1.30pm BST: US trade data
1.30pm BST: US PCE inflation measure for July
3pm BST: University of Michigan US consumer confidence report
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