![\"City](\"https:\/\/www.europesays.com\/britain\/wp-content\/uploads\/2026\/08\/bankshsbcnatwestlloydsbarclays.jpeg\")
\t\tStorm clouds gathered over the UK banks profit haul.\t<\/p>\n\t\t\tWednesday 26 August 2026 12:18 pm\n\t\t\t<\/p>\n
\t\tStorm clouds gathered over the UK banks profit haul.\t<\/p>\n
Lloyds and Natwest are flaunting their community credentials and pledging a raft of new social investment initiatives as fears grow that Prime Minister Andy Burnham will launch a punishing tax raid on the sector with the government\u2019s first Budget.<\/a><\/p>\n The two lenders are among a group of top UK banks looking to prove they can help\u00a0facilitate the Prime Minister\u2019s community and cost-of-living\u00a0agenda, analysts have suggested.\u00a0<\/p>\n Earlier this month, the government introduced a relief package for drought-hit farmers in a bid to mend ties with the sector following former Chancellor Rachel Reeves\u2019 controversial inheritance tax changes in 2024, which triggered protests and widespread backlash.<\/p>\n Shortly after, Natwest revealed it would increase support for agricultural customers who were impacted by the prolonged dry weather.<\/p>\n Farming minister Stephen Morgan heaped praise on Natwest for \u201cstepping up support\u2026 at a critical time\u201d.\u00a0<\/p>\n Meanwhile, just last week, Lloyds revealed a mammoth \u00a3100m investment to help young people gain the skills needed to get into work.\u00a0<\/p>\n It came weeks after Burnham pledged \u201cfundamental changes\u201d to the education system to help students \u201cget the skills [they] need and be given the respect [they deserve]\u201d.<\/p>\n Will Howlett, financials analyst at Quilter, told City AM: \u201cUK banks are becoming more vocal about their contribution to society and the wider economy at the same time speculation around higher bank taxes is re-emerging ahead of the Budget at the end of October.\u201d<\/p>\n Burnham this week said he wouldn\u2019t be \u201cunrealistic\u201d about the state of the public purse<\/a> when pressed about potential tax rises accompanying his spending plans.<\/p>\n Researchers at the left-leaning Resolution Foundation have forecast the \u00a322bn in fiscal headroom left in last year\u2019s Budget could have sunk beneath \u00a38bn following the impact of the US-Iran war.<\/p>\n The tightening fiscal conditions have coincided with UK banks expecting to pocket higher revenues on the back of elevated interest rates from the conflict in the Middle East.<\/p>\n Banks tout devolution credentials\u00a0<\/p>\n Chancellor John Healey will deliver his maiden Budget on 28 October. Howlett said the fresh initiatives from Lloyds and Natwest \u201call fit a wider effort by the sector to demonstrate its economic value and social contribution as the political debate shifts\u201d.\u00a0<\/p>\n One senior UK banking source: \u201cUltimately, banks are in the business of improving and enabling the economy \u2013 they\u2019re not primarily social beings\u2026 the banks shouldn\u2019t have to justify their existence and try to protect themselves against any potential taxation by saying: \u2018oh, aren\u2019t we good?\u2019\u201d<\/p>\n They added: \u201cIf you tax the profits of banks, then they\u2019re going to have less to lend, and if they lend less, then that\u2019s going to cause them to harm the economy.\u201d\u00a0<\/p>\n Ahead of last year\u2019s Budget, analysis from RBC pegged Natwest and Lloyds as most vulnerable to a shift in the bank tax rate.<\/p>\n Previous lobbying campaigns have focused on Reeves\u2019 headline message of growth, which she pledged to put financial services \u201cat the heart\u201d of.\u00a0<\/p>\n But under Burnham, banks have played to the devolution agenda touted by the former Manchester Mayor. HSBC\u2019s Georges Elhedery took the opportunity following second quarter results \u2013 where profit jumped 60 per cent \u2013 to stress the group\u2019s presence in all parts of the country.<\/p>\n The bank has \u201coperations all over the UK,\u201d Elhedery said, pointing to data centres in Sheffield, HSBC UK\u2019s headquarters in Birmingham and its biggest call centre in Swansea.<\/p>\n \t\t\t\t\tRead more<\/p>\n \t\t\tBig bank bosses on alert as tax noise gets louder under Burnham<\/a><\/p>\n Natwest\u2019s Paul Thwaite also shared a stage with Andy Burnham at the Great North Investment Summit in May just before he made his return to Parliament. Thwaite announced a fresh \u00a320bn of lending in the north as part of a regional growth effort.<\/p>\n Gary Greenwood, equity analyst at Shore Capital, told City AM banks are \u201cdefinitely trying to protect themselves from any unwanted attention but the reality is that their retail banks are making very high returns at present\u201d.<\/p>\n A spokesperson for banking industry body UK Finance said: \u201cBanks always provide a wide range of support to their customers and the communities they serve. The lending they do and the wider support they provide is vitally important to the whole UK economy.\u201d<\/p>\n Natwest said the new package reflects its ongoing commitment to the UK farming sector. Lloyds said its skills initiative was building on previous developments.<\/p>\n Wall Street gets louder on UK tax\u00a0<\/p>\n The approach of UK banks has contrasted with a volley of warnings from top US bankers who have threatened to pull investment out of Britain if its tax regime becomes uncompetitive.<\/p>\n Dame Jane Fraser, the Scot who leads US giant Citigroup<\/a>, emphasised the bank\u2019s growth across the UK on a recent trip though denied\u00a0 it was Burnham\u2019s Downing Street driving the bank\u2019s expansion.<\/p>\n \u201cWe\u2019re growing here, and not just because we have the new PM,\u201d she said on a visit to London earlier this month.<\/p>\n She pointed to the bank\u2019s Northern presence \u201cgrowing quite a bit\u201d and its \u201chuge business\u201d opportunity in Belfast.\u00a0<\/p>\n Fraser was even more direct regarding a new tax on the sector, warning \u201cmoney votes with its feet\u201d and there were \u201cvery viable\u201d alternatives to London.\u00a0<\/p>\n Quilter\u2019s Howlett said: \u201cFor international banks, the debate is increasingly about competitiveness, reflecting the fact they can choose where to deploy capital, jobs and investment.\u201d<\/p>\n London\u2019s bank tax rate dwarfs that of its rivals overseas at 46.4 per cent, raising concerns about the City\u2019s attractiveness. In New York, the rate sits at 27.9 per cent, almost two-thirds below that in London.<\/p>\n UK banks paid an estimated \u00a343.3bn in total tax contributions for the year ending March 2025.<\/p>\n One city source said banks will \u201calways be seen as an easy target\u201d for tax hikes with it being politically palatable across the aisle.<\/p>\n Fraser\u2019s Wall Street peer Jamie Dimon \u2013 well-regarded as one of the most influential names in finance \u2013 issued a warning to Healey in a phone call<\/a> shared last week, stressing the importance of \u201cgetting public policy right\u201d.<\/p>\n In a letter seen by City AM the boss of UK Finance David Postings last week wrote to Healey with a major tax rise warning.<\/p>\n \u201cBanking reaches every part of the economy and every region of the country, providing credit to households and SMEs, supporting investment, and acting as the UK\u2019s gateway to global markets,\u201d he wrote.<\/p>\n He added: \u201cThe debate needs to recognise both the significant tax contribution already made and the wider economic importance of sustainable profitability.\u201d<\/p>\n \t\t\t\t\tRead more<\/p>\n