Citigroup chief executive Jane Fraser says she is “worried” a potential windfall tax on banks under new Prime Minister Andy Burnham could severely damage London’s competitiveness and drive major investment to rival global financial hubs.
Speaking to The Banker in London this morning, she praised the city as an important centre with sensible regulation and talent, and with an equity culture. “But money votes with its feet. [Such a tax] makes it an easier decision not to book [business] in London.”
The CEO says as an alternative to London she would look at France, Germany, Hong Kong or even Japan, citing the substantial backing of the SpaceX IPO by Japanese investors.
Her comments come as lenders fear they could be hit with a bank tax as the new government faces the choice of either introducing levies or cutting spending to support Burnham’s cost-of-living pledges. Burnham took office at the end of July after his predecessor, Sir Keir Starmer, was forced to resign amid declining popularity.
Campaigners suggest that a windfall tax on banks could raise as much as £19bn for the government. Such a levy would mark an abrupt departure from the previous administration’s friendly relationship with the financial industry, which was seen as key to economic growth.
Concerned about the possibility of additional levies, JPMorgan CEO Jamie Dimon warned last month that these could jeopardise the lender’s planned £3bn London headquarters and deter investment in the country.
Speaking on The Master Investor Podcast with Wilfred Frost, Dimon said any increase in the bank levy or corporation tax surcharge would be “one more negative” when assessing the country’s attractiveness for investment.
“It may sound great, ‘tax the banks’, but it’s $5bn that my shareholders paid on that extra tax,” he said. “I just think things like that have adverse consequences.”
Last year, Citi confirmed plans to spend $1.5bn to refit its UK headquarters in London’s Canary Wharf district.
It disclosed the figure ahead of US President Donald Trump’s state visit to the UK in September, saying the investment underscored the lender’s “deep and longstanding commitment” to the British economy. Fraser travelled to the UK to coincide with Trump’s visit.
Citi was among the large Wall Street banks to report bumper year-on-year increases in second-quarter earnings last month. Its profit climbed 45 per cent to $5.8bn as investment banking helped lift quarterly revenue to its highest level in a decade. Presenting the results to investors, Fraser said the bank’s reorganisation is bearing fruit.
One of Citi’s sharpest critics, Wells Fargo analyst Mike Mayo told Bloomberg TV that the new structure, which simplified the sprawling group into five business segments — services, banking, markets, wealth and US consumer cards — each with a CEO responsible for specific targets, is “night and day different from Citigroup of the past, and frankly better than some of their peers too”.