Shares in Britain's major banks experienced a significant surge after the Chancellor, Rachel Reeves, spared the sector from a anticipated tax raid in the Autumn Budget.
Market Relief for Banking Giants
As the details of the Budget were revealed around midday on Wednesday 26 November 2025, banking stocks, which had been trading flat, shot upwards. Lloyds rose nearly four per cent to 94.12p, while NatWest jumped nearly three per cent to 621.20p. Similarly, Barclays saw an increase of over three per cent to 423.55p.
This market movement came as a direct response to the government's decision not to increase the banking surcharge, a sector-specific tax that sits on top of corporation tax. There had been intense speculation that the surcharge could be raised from three per cent to as high as eight per cent, which would have pushed the effective corporation tax rate for banks to 33 per cent.
Intense Lobbying and Industry Warnings
The decision follows fierce opposition from the banking industry, which had ramped up its lobbying efforts in the run-up to the Budget. David Postings, chief executive of UK Finance, welcomed the move, stating it "sends an important signal to international markets that the UK is focused on growth and attracting investment."
A report published by UK Finance with PwC highlighted the sector's concerns, revealing that the total tax rate for London lenders had risen to 46.4 per cent in 2025. This was shown to dwarf the rate for rivals in New York, which remained at 27.9 per cent, raising alarms about the City of London's global competitiveness.
Budget Drama and Pre-Volatility
Bank shares had been highly volatile in the weeks leading to the Budget announcement, sensitive to Treasury briefings and lobbying calls. The pressure for a tax grab had been substantial, with think tanks like the IPPR, political opponents, and even former Deputy Prime Minister Angela Rayner urging the Chancellor to target lenders.
This pressure had previously caused real market damage; at the end of August, a call for an £8bn windfall tax wiped nearly £2.5bn off NatWest's market value in a single session. Today's Budget outcome, however, provided a clear and positive resolution for the beleaguered sector, allowing share prices to climb on the certainty provided.
