Jamie Dimon, CEO of JPMorgan Chase, has issued a stark warning that the bank could scrap its plans for a new multibillion-pound skyscraper in London's Canary Wharf if the UK government, particularly under a potentially more left-leaning leadership like Andy Burnham, becomes "hostile to banks again" by increasing taxes. Dimon argues that JPMorgan has already paid an estimated $10 billion in extra taxes that he deems unfair since the post-financial crisis levies were introduced. He emphasized that the bank did not cause damage to the UK economy during the crisis, making these additional taxes unjust.
The proposed $10 billion tower, expected to house over half of JPMorgan's 23,000 UK staff and inject $9.9 billion into the local economy, creating around 7,800 jobs, hinges on a "continuing positive business environment in the UK." Dimon stated that while political instability itself is not the concern, a move towards higher taxes on banks would lead them to "reconsider" their significant investment. This comes amidst speculation from analysts, such as Jefferies, that an increase in the bank surcharge is "more likely than not."
The banking sector in the UK already faces an effective tax rate of 46.4% as of last year, significantly higher than 27.9% in New York and 38.9% in Frankfurt, according to UK Finance. This rate includes a 25% standard corporation tax, a 3% surcharge on bank profits, and the bank levy. There are concerns a new government might further increase the bank surcharge, with figures like Angela Rayner having previously suggested raising it from 3% to 5%. Dimon's warning is the latest from a bank boss, following similar sentiments from Barclays CEO CS Venkatakrishnan, highlighting the industry's sensitivity to potential tax hikes.
The new government, potentially led by Andy Burnham, faces a critical decision regarding a proposed business rates exemption for JPMorgan's tower. A Memorandum of Understanding (MoU) with Tower Hamlets Council, the Greater London Authority, and the government in March outlined a potential 100% business rates discount for five years, with Tower Hamlets receiving all business rates revenue for the subsequent 25 years. This deal, however, is not legally binding and requires formal designation as an enterprise zone, which is held up by legal complexities related to the post-Brexit Subsidy Control Act of 2022, requiring the deal to pass a seven-principle statutory test.
Andy Burnham's incoming Chancellor, expected to be Shabana Mahmood, will have the final say on the tax framework for the project. The decision on whether to uphold the MoU and proceed with the enterprise zone designation is imminent. Despite the potential economic benefits of $1 billion to $1.6 billion in local returns over 25 years calculated by Tower Hamlets, the new government's stance on bank taxation and targeted tax breaks remains uncertain, with a spokesperson for Burnham declining to comment on upholding the MoU.
