TechUK chief criticizes Sunak for favoring big banks in budget statement
Louise Beaumont, chairman of techUK’s Open Finance and Payments Working Group, lambasted Chancellor Rishi Sunak’s plans to reduce the bank profit surcharge levied on the UK’s largest banks from eight to three percent, describing the action as an act of “autoflagellation”. “This would seriously harm the UK fintech industry.
According to the plans, which are expected to be revealed in Sunak’s budget statement on Wednesday, digital banks are expected to pay 6% more corporate tax and not benefit from the reduction in the surcharge, as it is only levied on profits exceeding twenty-five million pounds.
“High growth, high investment companies usually suffer losses, so they miss out,” Beaumont said, in an opinion piece for CityAM. “This means that digital banks would face a 6% tax increase over the 1% that established banks face.”
She says the disparity casts a shadow over previous government rhetoric about the importance of innovation, competition and the continued development of the UK’s fintech industry.
Speaking at FinTech Week in April 2021, Sunak highlighted what he saw as driving growth in financial services: “If we can capture the extraordinary potential of technology, we will strengthen the UK’s position. as the world’s preeminent financial center. ”
“It seems that feeling may have been forgotten,” writes Beaumont. “Digital banks and their fintech peers are driving technological progress. Their innovations have helped the UK establish itself as the world’s leading fintech market and have forced traditional banks to reluctantly adopt new technologies in their offerings. Would the big banks have started offering digital services hadn’t they been for Monzo, Starling and Revolut? “
A £ 13.5 billion investment in tech industries in the first half of 2021 saw the UK produce twenty new unicorns. This represents a creation rate of almost one new unicorn per week. Of those twenty companies, eleven were fintech firms, attracting £ 4.2 billion in investment.
“Applying a 6% tax increase to these companies may well discourage investment and reduce opportunities for rapid expansion,” says Beaumont. “Technology industries, including fintech, are still nascent. Government ministers need to break free from old thought patterns (and lobbying) that prioritize big banks. An extension of the tax benefits offered to digital banks and fintech companies is fundamental, and apparently obvious policy to everyone except the Treasury. ”