JP Morgan to press on with London HQ despite new bank tax
JP Morgan is due to charge ahead with its £3bn new UK HQ despite the government hiking bank taxes in today’s budget, according to a source familiar with the matter.
The future of the 279,000 sq metres (3 million sq ft) tower in London’s Canary Wharf had been thrown into question earlier this year, after boss Jamie Dimon said he could consider scrapping it if Britain became “hostile” to banks.
However, a source familiar with JP Morgan’s decision making told the Guardian on Wednesday that while the bank was unhappy with chancellor John Healey’s decision to hike the bank surcharge from 3% to 6%, it would not derail plans for the HQ, which is due to house half of its 23,000 UK staff.
They added that while the tax hike was frustrating, JP Morgan was still on track to lodge a planning application for the £3bn tower in the “next few months.”
JP Morgan is keen to have its disappointment known, with a spokesperson for saying that targeting one of the UK’s most lucrative sectors “lacks principle”:
Closing post
And finally, here’s Capital Economics’s take on the day:
Rolls-Royce wins government support for new jet engine
Rolls-Royce is one of the corporate winners from the budget, with funding for its effort to develop a jet engine for single-aisle passenger planes.
John Healey said the government planned a multi-decade co-operation agreement with the FTSE 100 manufacturer, although the actual size of any support will be subject to future negotiations. The government said the jointly funded programme could be worth £2.5bn over 10 years.
Rolls-Royce makes engines for the twin-aisle planes that are mainly used for long haul travel, but it has been eyeing a return to the much larger market for single-aisle planes as Airbus and Boeing consider their next generation of aircraft.
The manufacturer’s chief executive, Tufan Erginbilgic, has touted single-aisle jet engines as one of the largest opportunities for UK economic growth, although there is no guarantee that the company will be chosen by the planemakers.
Prime minister Andy Burnham said the agreement was an example of the Labour party’s policy of reindustrialising Britain.
Some people have questioned why Rolls-Royce, whose profits have soared in recent years under Erginbilgic, requires government funding for the effort. Erginbilgic has argued that competitors will receive similar support, and any taxpayer funding would be repaid several times over if the programme is successful.
Housebuilders' shares down despite budget news
Shares in housebuilders have sold off this afternoon, despite John Healey announcing a first-time buyer ISA, along with the eagerly-awaited details of the new Your First Home scheme, also targeted at helping people buy their first home.
The chancellor also unveiled an additional £1.5bn grant for the construction of 10,000 new social rented homes, taking the social and affordable homes programme to just over £40bn over the next decade. But, analysts said the £4.7bn Your First Home initiative is less generous than expected.
Barratt Redrow is the biggest faller on the FTSE 100 index, down 5.6%, while on the FTSE 250, fellow builders Taylor Wimpey, Persimmon, Bellway and Vistry Group are among the biggest losers, down between 4% and 6.6%. Builders merchant Travis Perkins and property website Rightmove are also among the top fallers.
James Bailey, housing leader at PwC UK, said the new YFH scheme (which the housebuilders had been clamouring for) is “more modest than Help to Buy but should support first-time buyers and housebuilders. Price caps outside London based on local authority median prices appear reasonable, although early certainty on how they are determined will be important”.
“Stability in building regulations and the removal of brownfield biodiversity requirements should help, although their impact will vary and wider regulatory, tax and levy pressures remain unaddressed.”
Victoria Scholar, head of investment at interactive investor, told us:
A profit warning from the construction products distributor BRCK this morning (formerly known as Brickability Group) sent its shares plunging by 12%.
Russ Mould, investment director at AJ Bell, pointed to BRCK’s profit warning this morning (slower recovery than hoped) and how the First Time Buyer ISA and YFH scheme had been well trailered – “buy on the rumour, sell on the fact, maybe”.
Daniel Coatsworth, head of markets at AJ Bell, added:
JP Morgan to press on with London HQ despite new bank tax
JP Morgan is due to charge ahead with its £3bn new UK HQ despite the government hiking bank taxes in today’s budget, according to a source familiar with the matter.
The future of the 279,000 sq metres (3 million sq ft) tower in London’s Canary Wharf had been thrown into question earlier this year, after boss Jamie Dimon said he could consider scrapping it if Britain became “hostile” to banks.
However, a source familiar with JP Morgan’s decision making told the Guardian on Wednesday that while the bank was unhappy with chancellor John Healey’s decision to hike the bank surcharge from 3% to 6%, it would not derail plans for the HQ, which is due to house half of its 23,000 UK staff.
They added that while the tax hike was frustrating, JP Morgan was still on track to lodge a planning application for the £3bn tower in the “next few months.”
JP Morgan is keen to have its disappointment known, with a spokesperson for saying that targeting one of the UK’s most lucrative sectors “lacks principle”:
Machine games duty (MGD) is the tax levied on slot machines found in bookmakers, casinos, bingo halls and adult gaming centres (AGCs). The Chancellor faced calls to double the rate of MGD from 20% to 40%, a policy backed by one of his predecessors, Gordon Brown.
Amid fierce lobbying from gambling firms, which issued dire warnings of thousands of job cuts, Healey opted for a more modest rise to 25%. This, he said, would bring in nearly £150m a year, “raising taxes on gambling to support good growth on every high street”.
Investors responded with relief, adding £240m to the combined stock market value of Entain (Ladbrokes/Coral), Evoke (William Hill), Rank Group (Mecca Bingo/Grosvenor Casinos) and Playtech (designer of slot machine games).
Entain said the MGC hike will cost it £25m, which it expects to be able to mitigate, including by shop closures. Betfred boss Fred Done, whose family took a £30m dividend from their betting empire earlier this year, also warned that closures and job losses would follow.
The Chancellor singled out AGCs, sometimes known as “slot farms” for particular attention. As well as the duty rise, they will also be excluded – along with vape shops – from business rates relief available to retail and hospitality businesses.
Saxo Markets: no drama in a 'boring budget'
Traders gathered across London on Wednesday, watching the markets as John Healey delivers his first budget. Thousands of screens in the City were broadcasting live from Westminster, while walls of monitors track every movement in stocks and bonds.
But at Saxo UK, the Danish bank hosting the Guardian for the announcement, the mood is strikingly calm. Unlike certain other budgets in recent memory, this one has little to unsettle the trading floor.
Even as announcements trickled out before the chancellor stood up – including a rise in the minimum wage and another fuel duty freeze – there is already a sense that the bond market is in safe and welcomingly boring hands.
“It was a boring budget” says Andrew Bresler, chief executive of Saxo UK.
Healey’s announcement is so unsurprising, in fact, that traders trickle out to lunch before the chancellor even sits down. But this is what bond markets crave – zero drama, strict fiscal discipline and no big surprises. And Healey appeared to have delivered this on Wednesday, with a statistics-rich speech that seemed to be largely targeted at economists, investors and MPs.
The yield on the benchmark 10-year bond – a measure of the cost of government borrowing – fell slightly by 2 basis points to (0.02 percentage points) to 5.3225% – a sign that markets do not think that lending to the UK has become more risky.
“A nothing burger” said Neil Wilson, an investor strategist at the bank. “The market is not really reacting to it.
Most of Healey’s announcements were widely expected, including a higher tax on bank profits, with the chancellor insisting that he celebrated and was grateful for the role that the financial institutions played – enough to trigger some chuckles on the trading floor.
But the bond market’s focus was on how much fiscal headroom the chancellor chose to maintain (£15bn, down from £23.6bn).
And the government’s economic forecasts looked credible – even perhaps too pessimistic, Wilson said.
The figures suggested that borrowing will be higher than forecast back in March – with estimates of debt to stand at 4.2% of GDP in 2026-27, compared with 3.6% forecast in the spring statement. Meanwhile the economy is expected to grow by 1.2% this year, compared with previous estimates of 1.1%.
“This looks pessimistic to me, given how resilient the UK economy has been this year,” he said.
Traders are already looking forward to the next 2027 budget. Christian Højbjerg, a sales trader at the bank, said Healey had simply “kicked the can down the road” by not including any big fiscal measures.
Wilson added that it could add further pressure on the Labour government to call an early election next year.
“You can’t keep doing this,” he said. “Burnham has not been tested yet – there has not been an effort to cut spending like Starmer had straight away,” he said.
The government has said the time limit for the higher bank surcharge will be put in legislation, creating at least some hurdles if parliament had any inclination to extend it beyond March 2028.
The budget documents state:
Bank exec: it's a punch in the face
Healey’s bank tax hike has appeased investors, sparking a jump in bank stocks, but is “still a punch in the face”, industry sources have warned.
Ultimately, the hike was “better than feared” , according to a source from one industry lobby group, with lenders having steeled themselves for the bank surcharge on profits returning to pre-2023 levels of 8%.
Instead, it will rise from 3% to 6% in January, and only for a “temporary” period of 15 months.
That’s buoyed bank stocks, which are benefiting from a bit of a relief rally (see earlier post).
However, one senior UK banking executive said:
Questions are, however, being raised about what might happen after 15 months, particularly whether the ‘temporary’ rise in the bank surcharge from 3% to 6% will indeed fall away, or whether it will just be put under review and then potentially extended (as was Spain’s bank windfall tax).
The Budget – the news story
John Healey promised to steer Britain through “global economic storms,” as he announced a package of measures to cut consumers’ energy bills in his first budget.
The chancellor said 20m households in council tax bands A to D would receive a £100 payment – a measure he said would cost £2.6bn. A VAT cut on electricity bills will be extended to next July, added Healey.
As widely expected, Healey cancelled fuel duty rises pencilled in by Rachel Reeves and announced he would echo her approach of shifting energy levies on to general taxation.
Earlier, Healey had announced that the gas standing charge would be abolished, perhaps as soon as next year – a move expected to cut utility bills for 60% of households, with the costs met by heavier users.
Healey blamed the ongoing war in the Middle East for the deterioration in the economic outlook since Reeves’s spring statement, but insisted he would keep Labour’s deficit-reduction plans on track.
“Analysts like to speak of economic headwinds, but what we face today are global economic storms,” he said, describing his statement as “a budget built on fiscal discipline, which matches immediate action today with clear direction for the future.”
Hello again.
Bank stocks are pushing higher, after John Healey confirmed in the budget that the extra taxes on the sector will be lower than had been expected.
Today’s decision to lift the bank surcharge by 3 percentage points (so, up from 3% to 6%, we assume) means it will not return to the 8% level at which it operated before Jeremy Hunt lowered it in 2023.
NatWest are up almost 4%, and Lloyds are 3.75% higher, adding to their earlier gains.
The City had expected higher bank taxes ever since the Guardian broke news of the plan two weeks ago.
Investors may also be relieved that the surcharge will only last 15 months, once it starts in January.
This surcharge is levied on top of corporation tax.
Campaigners for a bank tax will surely be disappointed that the chancellor hasn’t gone further.
The TUC had been pushing for a higher surcharge – suggesting 16%, or even 35%, would be appropriate.
The big four banks posted combined profits of £46 billion last year after several years of high interest rates – £13 billion (41%) a year higher than when rates were at near-zero in 2021, they pointed out.
Keep track on the budget here
The budget statement will begin in under half an hour, at 12.30pm.
We’re liveblogging it all in the Politics Liveblog – do click through to keep up with the latest developments:
