The UK’s challenger banks are meeting with the Treasury to voice their concerns over the forthcoming bank tax and its effect on competition in the sector.

Challenger banks and building societies are exempt from the current banking levy but will be subject to its successor, an annual 8 per cent surcharge on banks’ profits, on top of corporation tax.

Directors from 11 new banking entrants – including Metro Bank, Aldermore and OneSavings Bank – are set to discuss the issue with Treasury officials today, highlighting concerns over barriers to competition and innovation in the banking industry.

David Webber, MD of Intelligent Environments, the UK-based technology partner to new digital-only bank Atom, also called on the chancellor to amend the tax, saying it gave established High Street banks an unfair advantage over challengers.

“Without reconsideration, we will not only unintentionality stifle new competition in banking – something the government has been so keen introduce – but also investment in a vibrant UK FinTech sector that is working hand-in-hand with these challengers to bring new innovation in the way we bank,” he argued. “The measures are therefore potentially damaging to the emergent FinTech sector.”

Forthcoming digital bank Starling – which is not involved in today’s Treasury discussions as it is in the process of securing its operating licence – told FStech that it was concerned by the direct impact the tax would have on the next generation of challenger banks, “in curbing their ability to invest and grow alongside more established players”.

In its latest policy blog, Starling added: “Businesses across the financial sector – small, medium, and large – need a clear and certain view of the landscape to plan future investments. The government’s willingness to introduce the new surcharge without any forewarning undermines this much needed certainty.”

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