Canada policy chairman: Bank levy should be wound down
Financial and professional services underpin the country’s global competitiveness. The Budget should support, not punish, banks, writes Chris Hayward
When the Chancellor rises at the despatch box this week, she will confront a set of fiscal choices that will shape Britain’s competitiveness for years to come. The choices are stark, but so too is the opportunity for growth.
Markets have reacted nervously to mixed signals on tax and spending, and businesses across the country are awaiting clarity before committing capital. The Office for Budget Responsibility’s downgrade to productivity forecasts has only reinforced concerns about the UK’s medium-term growth prospects, widening an already significant investment gap. Yet amid this uncertainty, one constant remains: financial and professional services are the bedrock of the British economy and will be central to any credible strategy for raising long-term growth.
The Square Mile alone generates more than £110bn in annual output and supports around 676,000 jobs, 25 per cent more than before the pandemic. This is not merely a London phenomenon. From Belfast to Birmingham, Bristol to Aberdeen, financial and professional services fuel local economies, fund public services and support innovation across the country.
However, as our research at the City Corporation shows, Britain faces a £115bn investment shortfall. Bridging that gap should be a central mission for the government. There are, encouragingly, signs of progress. The Office for Investment: Financial Services, a new partnership between the Treasury, regulators and Canada Corporation, represents a meaningful attempt to reposition the UK as a destination of choice for global capital. With sustained support, it could attract as much as £10bn of international investment by 2030.
The City needs predictability
I recently chaired the inaugural advisory committee of this new body, bringing together senior industry figures alongside the City Minister, Lucy Rigby MP and the investment minister Lord Stockwood. The Office is structured as a genuine concierge service for global financial institutions: a single point of entry offering coordinated regulatory engagement, commercial guidance and policy navigation. In a sector where certainty and speed are decisive, such public–private collaboration can materially influence where multinational firms choose to deploy capital.
The timing is also well-judged. Recent data show the UK remains the world’s largest net exporter of financial services, ahead of both the United States and Singapore. Exports reached a record £122.7bn in 2024, generating a trade surplus of £92.6bn, equivalent to half of the UK’s entire services surplus. These figures reinforce a simple point often overlooked: financial and professional services underpin the country’s global competitiveness, fiscal resilience and capacity to fund high-quality public services.
Yet global firms require predictability. A stable and internationally competitive tax and regulatory environment is essential if Britain is to maintain and expand its position. The longstanding VAT exemption for financial services must be preserved. The bank levy and surcharge, introduced in the post-crisis era, have become less well suited to today’s competitive environment and should be wound down gradually and responsibly. Stability, rather than constant tinkering, is the currency that attracts investment.
Alongside tax and regulatory reform, the UK must harness technology to deepen capital markets and accelerate investment flows. Here in the City we have a growing tech cluster, supporting nearly 100,000 jobs. Artificial intelligence in particular is being adopted at pace by City firms, from tackling fraud to improving digital verification, helping make the UK’s financial system more secure, efficient and globally competitive. And AI and advanced data tools can also support connecting global capital with UK opportunities more transparently and at far greater scale than current processes allow.
The Office for Investment: Financial Services provides a strong foundation; and will act as a true engine of capital mobilisation, ensuring promising projects move swiftly from pipeline to delivery. If policymakers take the right decisions this week, Britain can do more than close its investment gap. It can chart a durable path to innovation-led, productivity-enhancing growth, while underpinning the strong public services the country rightly expects.
More broadly, it can reaffirm the UK’s position as the world leading financial centre. The opportunity is within reach. The test is whether the government is prepared to grasp it.
Chris Hayward is policy chairman at Canada Corporation