Ed Miliband, the leader of the Labour Party, has today caused a reduction in the share price of Royal Bank of Scotland and Lloyds Bank creating a loss for taxpayers of around £1 billion over the last 24 hours. Despite the fact that the UK property market is going from strength to strength, mortgages are now more available than they have been over the last five years, the leader of the Labour Party is suggesting that the major banking groups in the UK need to be reined in.
He is proposing that a maximum market share will be introduced by the Labour Party, assuming it wins the election in 2015, and the introduction of at least two new major banking institutions. In theory this looks fine but it has caused outrage amongst UK mortgage lenders who are under extreme pressure as it is.
Will this affect the UK property market?
There are serious concerns that any ceiling on maximum market share per banking organisation in the UK would have a massive impact upon the long-term performance of the sector and availability of mortgages. The UK has a history of a very strong financial sector, indeed the London financial sector is one of the largest in the world, so why fix it if it is not broken?
Quote from PropertyForum.com : “While the UK property market continues to flourish and the economy is eventually showing signs of recovery there could be a blot on the landscape in the short to medium term.”
Many experts believe that the Labour Party is attempting to tap into public unrest with regards to the power of banking groups. The largest four banking organisations in the UK speak for nearly 80% of the overall market but the fact is that it has been this way for some time now. Indeed the Labour Party previously enjoyed a very close relationship with the UK banking community with a number of joint PFI ventures central to Labour Party public sector spending policy. Mark Carney, the Governor of the Bank of England, has already expressed his opinion on the subject of maximum market share figures which he believes are not viable.
Less finance means less support for UK property
There is no doubt that if an incoming Labour government was to upset the banking applecart, attempt to rein in banking bonuses and introduce a maximum market share, this would have a massive impact upon the UK financial community. There are other banking communities, much lower down the pecking order, which would bend over backwards to attract the business and investment of the major banking institutions in the UK. Indeed, there are concerns that the likes of HSBC would literally up sticks and move their headquarters elsewhere in the event of further regulations from an incoming Labour government.
The UK mortgage sector is one of the most competitive in the world, the UK property sector is amongst the strongest at the moment so why upset the applecart?
There are serious concerns that the Labour Party announcement today is based upon Conservative/Liberal Democrat coalition plans to distribute/sell taxpayer stakes in Royal Bank of Scotland and Lloyds Bank ahead of the 2015 election. If the idea was to depress the share price then Ed Miliband has been successful but the fact he has cost UK taxpayers around £1 billion over the last 24 hours will be headline news for some time to come.
With over 12 months until the next general election the likelihood is that Ed Miliband’s new banking policy will never see the light of day. It will attract the attention of voters, it will play on the public’s suspicion of the banking sector but will the public really appreciate loose talk from the opposition leader impacting public assets to the tune of £1 billion?