^{Photo: Bloomberg}

Barclays CEO C.S. Venkatakrishnan has raised concerns that proposed increases in the UK bank levy could significantly slow hiring and lending across the financial sector, potentially hampering economic growth.

Heavier Taxation Compared to Global Peers

Venkatakrishnan emphasized that London’s banks are already subject to higher taxation than those in other major financial centers. He described the rationale behind the proposed levy hike as “facile and fallacious,” warning that additional financial burdens could reduce the sector’s capacity to support businesses and households.

“Higher bank taxes inevitably reduce the capital available for lending, which in turn could affect investment and job creation in the broader economy,” he said.

Impact on Hiring and Economic Activity

The CEO highlighted that Barclays and other major banks are weighing hiring decisions carefully in light of increased levies. London has long positioned itself as a global financial hub, but rising taxes could make it less competitive compared to New York, Frankfurt, or Singapore, where banking sectors face comparatively lower regulatory levies.

Analysts estimate that the UK bank levy currently raises over £3 billion annually from the financial sector, and a further increase could potentially add billions more. Venkatakrishnan noted that these costs often trickle down, influencing both lending rates and employment growth within banks.

Supportive Stance Toward Government Policies

Despite his criticism of the tax proposal, Venkatakrishnan maintained that the Labour government is “pro-business” and supportive of the financial sector. “I have felt it since the day they walked in,” he said, signaling confidence that dialogue with policymakers can mitigate some of the proposed impacts.

He also acknowledged the government’s broader efforts to maintain London’s global financial competitiveness while balancing fiscal needs, a challenging task amid shifting economic conditions post-Brexit and amid inflationary pressures.

Outlook for the UK Banking Sector

While the proposed levy increase presents short-term challenges, Venkatakrishnan emphasized that banks remain committed to supporting the UK economy through lending, innovation, and employment. However, he warned that without careful calibration, the policy could inadvertently slow economic recovery and reduce London’s attractiveness as a global banking hub.

Industry observers note that the debate over bank levies is part of a broader global conversation on how to balance taxation, financial stability, and economic growth in major economies. The outcome of the UK government’s proposals could influence investment decisions not only in Britain but across Europe’s financial markets.