Political Winds Shift Against Banks, Triggering £6.4bn Market Storm

The political winds appeared to shift against the UK’s banking sector on Friday, triggering a market storm that blew away £6.4 billion in value. A report from the IPPR thinktank, calling for a new windfall tax on lenders, was seen by investors as a sign of a changing political climate that could spell trouble for the industry.
The report argued that the political and economic logic has changed regarding the legacy of quantitative easing (QE). What was once a necessary support mechanism is now a £22 billion annual drain on public funds and a “windfall” for banks. The IPPR believes the time is right for a new tax to correct this imbalance.
The market reacted as if a storm was brewing. Fearing that politicians might be swayed by this argument, especially with a £40 billion budget deficit to address, investors sold banking stocks en masse. The resulting £6.4 billion loss in value reflects the market’s fear of a less friendly and more interventionist government approach.
Financial analysts acknowledged that banks are often “easy pickings politically.” However, they also warned that a shift towards punitive taxation could have serious economic consequences, potentially undermining the government’s own pro-growth objectives by limiting the sector’s ability to provide credit.