Investor Jitters Turn into a Rout as Tax Axe Hangs Over Banks

What started as investor jitters over a potential new tax on banks turned into a full-blown rout on Friday, with £6.4 billion being wiped from the sector’s value. The transformation from nervousness to panic was swift, as a thinktank report made the threat of a tax axe hanging over the industry feel frighteningly real.
The jitters were sparked by the IPPR’s proposal for a windfall levy to reclaim the £22 billion annual cost of the QE program from the banks that are benefiting. The report gave a concrete form to investors’ vague fears about how the government might plug its £40 billion budget hole.
The rout began as these jitters spread through the market, triggering a wave of selling. Shares in NatWest plunged nearly 5%, and Lloyds over 3%, as the abstract threat became a quantifiable risk to future earnings. The sheer scale of the sell-off shows how quickly market sentiment can shift from caution to fear.
The tax axe now hangs precariously over the sector, creating a climate of uncertainty that is damaging in itself. Until the government clarifies its position, investors are likely to remain on edge, and the sector’s valuation will continue to reflect the risk of a sudden, sharp blow from the chancellor’s budget.