Financial services contributed £71bn in tax
THE financial services sector contributed £71.4bn in tax last year, highlighting the potential hit to Government coffers if Brexit results in restricted access to the EU’s single market.
A report by the City of London Corporation and accountancy giant PwC shows that nearly a quarter of financial services’ turnover in the last financial year “went straight to the public coffers,” and accounted for 11.5% of the UK’s total tax receipts for the 12 months to March 31.
It marks the sector’s highest tax total in the report’s nine year history, thanks in part to corporate tax reforms that delivered £8.4bn in the last financial year, and the bank levy which saw lenders pay out £3.4bn over the same period.
But those contributions hang in the balance ahead of Brexit negotiations with the EU.
London’s financial firms have become increasingly concerned about their ability to trade with Europe if the UK Government opts for a “hard Brexit” and pulls Britain out of the single market.
They are waiting with bated breath to discover whether the UK can hold on to passporting rights which allow lenders to trade freely across EU.
Restricted access could hit revenues and subsequently impact tax payments.
Financial services currently employ 1.1 million people across the UK, amounting to 3.4% of the national workforce – with the average employment tax per worker reaching £32,000.
Mark Boleat, policy chairman for the City of London, said: “In light of the UK’s decision to leave the EU, these new findings not only demonstrate the significant contribution made to Government revenues, but are also key in helping us to understand the potential impact of Brexit on different subsectors within financial services.
“As one of the UK’s biggest service exporters, it’s understandable the sector also contributes a considerable amount of tax. Despite this, the sector arguably stands most to lose as negotiations loom.
“It makes it clear that Government should be engaging with firms as it approaches talks with the remaining EU 27.”
His comments come amid fears that rival financial centres like Dublin, Frankfurt and Paris could end up siphoning off some of the City’s business and capitalising on the uncertainty surrounding Brexit. But a survey released by Synechron and TABB Group last month showed that 72% of UK financial service executives see London reigning supreme as the regional financial centre in five years’ time despite Brexit.