(City A.M) -- Britain's banking sector contributed a mammoth £35.4bn in taxes during the most recent fiscal year, according to analysis published this morning.
The tax contribution, which includes both UK banks and foreign lenders operating in Britain, has climbed from £31.3bn just three years ago. The latest figure is nearly enough to cover the government’s entire defence budget.
The numbers, based on analysis by accountancy giant PwC, show that £18.1bn came from UK banks, while £17.3bn came from foreign banks.
“Taxes borne – those that are a direct cost to a company – accounted for £19bn of the total while taxes collected made up £16.4bn,” the report said.
The report also took into account the impact of the introduction of the bank surcharge in January last year, which imposes an extra charge of eight per cent on the profits of banking firms.
That generated £1.1bn in payments from the sector, and UK Finance, which commissioned the study, said the surcharge, along with a rise in corporation tax due to increased profitability, loss relief and compensation payment restrictions, drove the 11 per cent rise in taxes borne for the year.
Stephen Jones, the CEO of UK Finance, said:
This report is timely as it shines a light on the importance of agreeing a post-Brexit settlement that supports the sector, and crucially the foreign banks who have chosen to base themselves here to serve UK and European customers
Bank bosses and Treasury officials have warned that a failure to agree a transitional Brexit deal with the European Union by the end of the year could force banks to trigger contingency plans, potentially moving jobs out of London.
Meanwhile yesterday, the head of the world's largest clearing house warned that his industry is also in dire need of some certainty over Brexit.
Daniel Maguire, chief executive of London Stock Exchange's LCH, told a House of Lords committee that he would like to see a three year "standstill" agreement reached "so we can make everything safe and sound".
Without "absolute certainty" in place, the government risked forcing the sector to trigger its contingency plans, which "meant trains start to leave the station, and it's very hard to pull that back."
He added: "The fundamental point for us is that if we go down the route of invoking contingency plans and we end up with some form of location policy, this will result in a much more systemic issue in breaking up the pools of liquidity, the transparency and the oversight of risk management that has been bought through the centralisation of these markets.