Financial sector's tax contribution hits a record £71.4bn

General Election - Economy
Almost one pound in every four earned by the City went straight to public coffers. (Source: Getty)

The tax take from Britain's financial sector has hit record levels, underscoring its economic importance as talks between the government and the City enter a new phase in the run up to Brexit.

Fifty financial services firms, largely UK-listed and including the Square Mile's banking titans, paid £71.4bn into HM Treasury's coffers for the year to 31 March according to a study launched this morning by PwC and the City of London Corporation.

The huge sum represents an increase of 7.4 per cent on the 2015 figures, and means financial services businesses contributed 11.5 per cent of all UK government tax receipts last year. In total, almost one pound in every four earned by the sector during the last financial year went straight into the public purse.

Chancellor Philip Hammond and Brexit secretary David Davis met City bosses at the Shard yesterday in a sign of rapprochement between the government and the City.

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Both Hammond and Davis have engaged with the sector previously, but insiders noted it is the first time the two Tory heavyweights have presented a united front in meetings.

Among those invited to meet ministers were Goldman Sachs, Santander, Barclays, as well as London insurance market Lloyd's. The City is keen to safeguard passporting rights which will give it access to customers in the EU. A so-called hard Brexit could put those rights at risk.

City A.M reported in October that talks between the government and the City had got off to a rocky start, but a Square Mile source said yesterday the government was showing improved coordination both within and across departments and increased willingness to listen to the concerns of the sector.

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“The conversations are productive, and in the last couple of weeks the government have become a lot more organised and coordinated in their approach,” the source said.

The Institute of Directors' chief economist James Sproule urged both sides to remember the importance of a strong and diverse British financial sector during the upcoming Brexit negotiations.

“The City’s strength also must be seen as an asset to the broader EU, providing funding for increasing numbers of European companies,” he said in response to the PWC figures.

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Meanwhile, a government consultation revealed yesterday that overseas banks have failed in a bid to escape the UK's banking levy.

Consultation papers showed foreign banks lobbied for the charge on the balance sheets of their UK permanent establishments to be dropped.

But officials rejected the demand, arguing the levy plan “remains appropriate”.