Banks’ contribution to the UK’s public finances climbed 3.5pc to £35.4bn last year, underlining the importance of the sector and the risk of a “no-deal” Brexit to the British economy.
Foreign banks contributed £17.3bn, almost half of the total figure, including a majority of payroll taxes in the sector, according to research by PwC.
“This report is timely as it shines a light on the importance of agreeing a post-Brexit settlement that supports the sector, and crucially the foreign banks who have chosen to base themselves here to serve UK and European customers,” said Stephen Jones, chief executive of industry body UK Finance.
The report comes at the beginning of the banking results season after updates from Lloyds and Metro Bank yesterday and Barclays’ third quarter results due today.
The sector provides employment for 1.6pc of the UK’s workforce and generates 7.2pc of all employment tax receipts, PwC said.
Rising profits pushed up the amount of corporation tax paid in the 2016-17 financial year, meaning the total tax borne directly by banks – that is, excluding payroll taxes and others deducted at source – rose 11pc.
“While the sector is in a strong position to face future challenges, this report underlines the importance of the banking sector and the need to ensure that the UK retains its strong position as a leading financial centre,” said Andrew Packman, tax transparency and total tax contribution partner at PwC.
Last week Goldman Sachs boss Lloyd Blankfein hinted the investment bank could move some of its operations to Germany post-Brexit.
“Just left Frankfurt. Great meetings, great weather, really enjoyed it. Good, because I’ll be spending a lot more time there. #Brexit,” he tweeted.
In his Mansion House speech back in May, Bank of England governor Mark Carney warned of the risks should financial services firms face major barriers to trade. The industry pays taxes that cover two thirds of the cost of the NHS, he said, and runs a 1.5pc trade surplus with Europe.
“We could take these realities for granted. And it would be all too easy to give into protectionism. But as we learned in the 1930s, that road leads neither to equity nor prosperity.”