Santander UK’s boss warned that Britain is becoming an unattractive investment destination due to high taxes, amid increasing pressure on the Chancellor.
Mike Regnier told the MPs that Santander UK’s chief executive, Mike Regnier, said that Santander UK was able to attract money from other countries that would have otherwise been invested in Britain due to more favorable regulations and lower taxes in those other countries.
He said to the Treasury Select Committee that “our tax rates are higher” than other countries with which we compete as a UK-based business.
Even in a good year, we are not able to achieve the returns expected by our parent company’s shareholders in the UK.
Santander UK belongs to an international banking group with its headquarters in Spain. Its parent company decides where it wants to invest by looking at the regulatory and tax environment.
He said: “The weekly decisions our group makes are almost: Where can I best invest my next euro? Does it belong in the UK or not? What about Brazil, Mexico or the US? What is the best place to invest that extra euro?
“The cost is paid by the banks in the UK. That is unusual worldwide. And as a result, when you think about it, if it were me, I wouldn’t necessarily put a lot of capital into the UK. I would instead invest it elsewhere.”
According to the Office for Budget Responsibility, business investment will fall by over 5pc by this year. It is then expected to recover only marginally by 1.4pc by 2025.
Lack of investment in Britain has been blamed as a major factor for slowing growth for many years.
Business leaders have warned repeatedly that high taxes are a barrier to investment. Simon Lowth, BT’s chief financial officer, warned last year that Britain could be heading in a “dramatically anti-investment” direction if taxes continue to rise.
In Britain, the corporation tax is 25pc compared with 21pc in America. The headline rate for the UK increased from 19pc up to 25pc in last year’s levy, which was the largest increase in its history.
Santander and other banks are also subject to a number of levies. The bank must also pay the bank levy and a 3pc profit surcharge on top of the corporation tax.
According to the OBR, the combined levies are estimated to add approximately PS2.5bn per year to the tax bill for the sector.
Taxes are high in the entire economy, even though the banking sector is heavily burdened. According to the OBR, tax burdens will reach 37.1pc by 2028-29 – the highest since 1948.
In his Budget, Jeremy Hunt stated that he hoped the scheme of “full expense” would be expanded to include leased assets, reducing taxes on company expenditures.
The Chancellor announced that pension funds would be encouraged to invest more into UK companies. He also announced the creation of a British ISA which allows savers to make tax-free investments up to £5,000 in British listed companies.
Mr Regnier appeared before MPs along with other bank leaders Vim Maru from Barclays, Charlie Nunn from Lloyds and Paul Thwaite from NatWest.
The executives called on lawmakers to force telecom operators and tech companies to assist lenders in combating the fraud wave that is sweeping the UK.
Mr Thwaite stated: “Banks are only able to do so much, but we need to involve a variety of sectors to tackle this.”
Mr Nunn said: “Some telecommunications firms and tech companies have made progress. Others are still behind.”
But it’s not enough. We need more tools and to collaborate with these organisations in order to manage fraud.