Over canapés of beef and stilton pie, bone marrow gravy and mushy peas, the financiers at JP Morgan’s New York headquarters held their champagne flutes aloft for a toast: “His majesty the king”.
Just days before Rachel Reeves’s budget – amid the chancellor’s efforts to soothe business fears and bond market jitters – Jamie Dimon, the Wall Street banking company’s boss was hosting a birthday celebration for King Charles at it’s new $3bn (£2.3bn) Manhattan headquarters.
Despite the union jack emblazoned on the skyscraper, the king was not there. Varun Chandra, the prime minister’s envoy, however, was among the 400 guests. Dispatched, according to the Financial Times, to reassure the JP Morgan boss of Labour’s pro-business stance.
This week – hours after banks were spared a tax rise in Reeves’s £26bn budget – Dimon unveiled plans to build a 279,000 sq metre (3m sq ft) tower in London’s Canary Wharf district, with a caveat that a “continuing positive business environment in the UK” was required.
It is understood that planning issues and long-term considerations are more important for the bank than any one budget. But the episode still highlights how financial services has won a prized status in government, amid ferocious City lobbying to ensure it was one of the few off-limits sectors in Reeves’s smorgasbord tax-raising budget.
For months Labour has been rolling out the red carpet for Wall Street and City financiers, amid a far broader campaign to woo bankers and company bosses after the party’s pre-election love-in with industry turned sour.
Norman Blackwell, the former chair of Lloyds Banking Group, who also advised Margaret Thatcher on policy in the 1980s, said Reeves had “work to do” to rebuild the confidence of the City after her £40bn tax-raising 2024 budget.
“Before the election they talked as though they would be a party that would recognise the importance of wealth creation in the economy by business and entrepreneurs. Everything they have done in government has gone in the opposite direction.
“They have increased taxes on business, increased regulation in the labour market, [and] the threat to high earners and non-doms. If you look at the numbers of entrepreneurs and rich people leaving the country – they have convinced people that they do not value and will not support entrepreneurs.”
Despite the reprieve for banks, he said the budget was still unlikely to help much because it would do little to boost UK growth. “It’s a budget that takes the economy in the wrong direction, and is in that sense self-defeating in terms of growth and future government revenue.”
Much of the rationale behind the rearguard action is pragmatic. Reeves sees the City as critical to the government’s growth mission, with financial services among the eight critical sectors backed in Labour’s industrial strategy. Finance contributes almost a tenth of UK GDP, employs 1.2 million people, and brings in more than £40bn a year for the exchequer.
In Birmingham earlier this autumn, the chancellor hosted a gala dinner for 300 financiers and business chiefs – putting on a ballet and a spoken-word poetry reading on the eve of its first regional investment summit. Sponsored by HSBC, Lloyds, Eon, KPMG, and IBM, the event the next day at Edgbaston cricket ground secured more than £10bn of investment in Britain.
However, Labour’s proximity to the boardrooms of the Square Mile does not sit comfortably with the party’s own MPs and voters for whom the memories of the 2008 financial crisis still sting. Most people – including a majority of those considering voting for Nigel Farage’s Reform UK – would have backed a windfall tax on banks at the budget.
“The chancellor’s failure to levy a windfall tax on the banking sector in the budget is a damning indictment of the stronghold the sector continues to have over our politics,” said Sara Hall, a co-executive director at the campaign group Positive Money.
“It is very concerning that whilst the public is asked to contribute more to fix our crumbling public services, banks got off scott free – it’s high time we have a proper public conversation about the sector’s lobbying and influence.”
Last month Reeves hosted Goldman Sachs boss David Solomon in No 11 Downing Street, with the head of the Wall Street firm advising her against increasing bank taxes. Politico reported he ripped up his briefing notes to focus exclusively on the issue, a detail denied by the bank.
This week, after the budget, Goldman announced that it would expand its Birmingham office and hire 500 staff, in a move that would more than double its workforce in the UK’s second-largest city.
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The story could have been different. Reeves had been actively considering a multibillion-pound bank windfall tax to help repair the public finances and fund the removal of the two-child benefit limit.
In August a paper by the Institute for Public Policy Research thinktank estimated Reeves could rake in as much as £8bn, in a report triggering a sell-off in UK banking shares and prompting the industry to lobby harder.
Reeves’s office was furious with the IPPR report suggesting a windfall tax, and subsequent share price reaction. However, insiders said the Treasury had requested to see the report in advance of its publication.
The Guardian also understands bank profits – inflated by the Bank of England’s quantitative easing scheme – were examined by Treasury officials on the instruction of ministers in the buildup to the budget.
“We get whiplash in meetings with HMT at times,” said one senior banker.
“One minute they’re [senior officials] incredibly nervous about inward investment, the next they’re suggesting that major structural problems are businesses’ fault. Narratives like lenders are the real handbrake on growth creep in. I think they’ve come to realise that the City can’t be taken for granted. London’s one of many financial centres for global banks.”
London’s high-paid corporate lawyers were also among those who expressed relief after the budget, after escaping a threatened tax on their earnings. Reports suggested Reeves was looking at scrapping an exemption for limited liability partnership members from national insurance – a move that would have raised £2bn.
Mark Evans, the president of the Law Society, a body representing lawyers, this week welcomed the reprieve, saying it would have been damaging to the UK economy and claiming that law firms would not have been able to invest, hire, and contribute to growth.
Banking industry figures said the sector pays a 28% headline rate of corporation tax, above the standard 25% rate charged on company profits, in addition to a 0.1% levy on bank’s balance sheets. “It’s hard to say we don’t pay a fair share, as we pay more,” said one bank lobbyist.
However, banks have still managed to rake in record profits, benefiting from rising interest rates and the winding down of the Bank’s quantitative easing scheme. In total, Positive Money estimates banks made £24.1bn in the first half of 2025 alone, amounting to almost £1bn a week.
Speaking earlier this autumn, Paul Nowak, the general secretary of the TUC, said getting banks to pay a little more to help rebuild Britain was common sense. “Banks have done very well out of the British people. It’s only right that they use their bumper profits to pay a bit more in tax to invest in our hospitals, schools and local councils.”
The Treasury was approached for comment. JP Morgan declined to comment.