Budget tax raid will send global banks and UK business owners fleeing overseas, Burnham warned

Banks and business owners will snub the UK if they are hammered with higher taxes in the Budget, Andy Burnham has been warned.

Senior executives from global banks stretching from the US and Europe to Asia and Africa said they would divert investment away from the UK if taxes on the industry are raised.

The warning came as a survey found half of UK business owners would consider quitting Britain if capital gains tax (CGT) was increased or a new levy on wealth introduced.

And in a stark message to the Prime Minister and Chancellor John Healey, tax experts said ‘those with the broadest shoulders have the longest legs’ – meaning they have the means to leave the UK if the burden becomes too onerous or unpredictable.

The warnings betray growing fears that Labour is plotting a fresh tax raid in the Budget on October 28 – with banks and the wealthy among those in the firing line.

John Healey and Andy Burnham have been warned banks are already 'very highly taxed' in the UK 

Bankers are increasingly worried about a windfall tax on the industry, with David Postings, chief executive of lobby group US Finance, declaring: ‘I think already we’re very highly taxed.

‘To go further than that, really I think would reach a tipping point and would be very risky on the part of the government.’

He added: ‘Financial services are a vital part of the UK economy and a critical driver of growth. To support long-term investment and confidence, we are calling on the government to avoid increasing bank taxes and to set out a clear plan to strengthen the UK's international competitiveness.’

Analysts by PwC for UK Finance shows a typical corporate and investment bank faces a tax rate of 46.5 per cent in London compared with 42.2 per cent in Amsterdam, less than 40 per cent in Frankfurt and below 30 per cent in Dublin and New York.

UK Finance warned: ‘An increase in bank-specific taxes would increase the differential between the UK and competing jurisdictions further, weakening the attractiveness of the UK as a place for banks to invest, deploy capital and locate jobs.’

Separately, a survey of 500 business owners by professional services group S&W found 50 per cent would consider leaving the UK if CGT was increased and 51 per cent would looking at quitting the country if a wealth tax was introduced.

Toby Tallon, a tax partner at S&W, said: ‘Business owners are sending a clear warning to the Chancellor: further tax rises risk undermining confidence, discouraging investment and prompting more entrepreneurs to look overseas.

‘While the government has limited options when it comes to raising additional revenue to fulfil its spending commitments, capital gains tax and the possible introduction of a wealth tax are areas business owners will be watching particularly closely.

‘If the UK wants growth, it must remain an attractive place to start, scale and sell a business. As the Budget approaches, business owners will be looking for measures that back ambition, encourage investment and strengthen the UK's reputation as a competitive place to do business.’

Elisa Sofocli, a partner at tax and business advisory firm Blick Rothenberg, said uncertainty over taxes is causing even more alarm than tax rates themselves.

‘Taxpayers don't know where the rules are going next,’ she said. ‘Those with the broadest shoulders have the longest legs, and for someone who genuinely has a choice about where to live, work and build their future, it's entirely rational that the longer-term tax position will form part of that decision.

‘The debate should not simply be “are wealthy people paying enough tax?” or “are taxes too high?”. The more useful question is: “what makes someone choose the UK when they have the financial freedom to choose somewhere else?”

‘Tax is part of that answer, but so is certainty, stability, access to talent and markets, education and quality of life. If the Government wants growth, they need to think not just about how much tax they can collect from people who are in the UK, but why people would choose to be here in the first place.’

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