LONDON: Shares in British banks rose Thursday as investors shrugged off news of a hike in the banking levy, one day after it was announced in the coalition government's annual budget. Finance minister George Osborne, unveiling his second annual budget on Wednesday, announced that he would hike the levy to offset cuts in corporation or business tax. The levy will be hiked in January 2012 to raise another £285 million ($459 million, 324 million euros). That is the second hike after Osborne said last month that it would be increased by £800 million this year to £2.5 billion.
"The effect on the banking sector is fairly neutral as the rise in banking levy is offset by the cut in corporation tax," noted CMC Markets analyst Michael Hewson. Global banking giant HSBC saw its share price jump 2.42 percent to end at 646.60 pence on Thursday and Barclays gained 1.27 percent to 290.90 pence.
State-rescued lenders Royal Bank of Scotland and Lloyds Banking Group saw their share prices gain 1.11 percent and 0.18 percent, to stand at 41.88 pence and 60.35 pence, respectively. Osborne said Wednesday that he would cut the corporation tax from the current level of 28 percent to 23 percent by 2014. Previously, the government had planned to cut the rate to 24 percent by 2014. London's benchmark FTSE 100 index, meanwhile, rallied 1.47 percent to finish at 5,880.87 points on Thursday.
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