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Financial services should remain VAT-free. The bank levy and surcharge should be phased out over time. And stamp duty on UK shares should be abolished, says Chris Hayward A month from now, the Chancellor faces a selection of stark choices. The easiest among them should be whether to supercharge the UK’s financial services sector – or risk letting the engine of our economy stall by stymying growth through more business taxation. The Square Mile alone generates more than £110bn in annual economic output. It supports 678,000 jobs – 25 per cent higher than before the pandemic. This isn’t just a London success story; this is the national success story; one that fuels growth through investment, innovation and opportunity in every nation and region of the UK The financial services sector makes up over 12 per cent of total UK tax receipts: more than the government’s annual education budget and more than half the health budget. Yet despite its strength, a £115bn investment gap continues to hold back UK growth. Bridging that gap must be the defining mission of this government. Over the past fortnight, the City of London Corporation has proven to be the government’s partner of choice in crafting financial services policy. The newly operational Office for Investment: Financial Services – a collaboration between the Treasury, financial regulators and the City Corporation – is a practical example of how this government can transform ambition into action. This partnership will make it easier for financial services firms to start and scale in the UK. And could attract £10bn in international capital by 2030. The City is the partner of choice The Chancellor’s recent announcements at the Regional Investment Summit build on that ambition of making the UK the best place in the world to invest and do business. Delivering on the commitment made in the Mansion House Accord is critical. The Accord could unlock £25bn in domestic investment in areas such as infrastructure. By bringing together and investor-led partnership of 20 of the UK’s largest pension providers and insurers, she has taken a vital step towards mobilising billions of pounds of capital into projects that boost productivity and raise living standards. The task now is to make this capital work further and faster in the national interest. Our message to the government is simple; this Budget should seek to inject creativity, capital and confidence into the financial services ecosystem. Sending the right signals to wealth creators will be essential to stimulate growth, boost tax receipts, and in turn deliver sustainable public services. Our message to the government is simple; this Budget should seek to inject creativity, capital and confidence into the financial services ecosystem To that end, the City Corporation’s Budget submission makes four key recommendations. First, we must pursue a tax policy that supports the UK’s industrial strategy. That means creating an internationally competitive regulatory and tax environment. Financial services should remain VAT-free. The bank levy and surcharge should be phased out over time. And stamp duty on UK shares should be abolished. As a first step, the government could remove stamp duty on newly listed companies to encourage more IPOs in London. Second, maximise domestic capital. The government should accelerate work to build a credible pipeline of investible projects in high-productivity sectors such as digital, energy, and transport infrastructure. And for retail investors, we need a culture shift from saving to investing. That means reviewing the balance between Cash ISAs and Stocks and Shares ISAs, finalising the Advice Guidance Boundary Review, and finding new ways to nudge savers towards long-term equity investment – particularly in UK-listed firms. Third, raise overall investment levels by harnessing AI and digital tools to connect capital with opportunity. An intelligent, automated platform can help match global investors to UK projects faster, more transparently, and at scale, helping the UK keep pace with international competitors. I am proud to have delivered the Office for Investment: Financial Services with the Treasury. It’s efforts now need rocket boosters to ensure it can make a meaningful difference. Finally, we must lead globally on sustainable finance. The UK has a golden opportunity to define the market for transition finance, by identifying investible projects and de-risking private capital. By aligning our public finance institutions and championing the Transition Finance Council’s guidelines at COP30, we can ensure the UK sets global standards to crowd international investment. If the UK gets this right, we won’t just close the investment gap. We’ll unlock a new era of sustainable growth to power our economy for decades to come. It’s now time to seize the moment. Chris Hayward is policy chairman at the City of London Corporation
