Is it time to invest in the remaining investment banks and assorted financial Institutions? OK they are not called â€investment banks’ anymore but we all know who I am talking about. There is a small sense of medium sized to large corporations finally starting to baulk at various new business tax burdens being continually levied in the UK. In separate stories we can see a number of companies considering moving capacity out of Britain to the continent where the arbitrariness of retroactive or boutique taxes are less onerous. While this is in the early stages of name and bluff calling, traders would be advised to remain cautious over the negative possibilities this may engender. Anyone trading the financial markets, whether that is through spread betting, CFDs, stocks and shares etc should also accept that, in the short term, we are likely to run through a protracted period of dividend cuts. Companies will look to pare back borrowing and hold onto cash. Naturally, this has been well disclosed already and â€should’ not have much of a negative impact. Of course â€should’ and â€will’ are two very different words. With each week/month of no real signs of an economic upturn emerging the desperation of the UK Revenue Service to grab as much as at can to cover the excesses of the current administration may ruffle more and more feathers. 70% of FTSE 350 companies’ income comes from non-domestic sources. That can turn into a position of weakness rather than strength if more and more of the taxable revenue is transferred to more favourable locales. While the city slowly starts to regain some confidence, much to the irritation of many journalists, the rest of the UK seems to be settling ever lower into the mire. The squeals from many over the lack of hubris from Goldman Sach’s or Barclays, to name just a couple, obscures the fact that many financial institutions did not do as badly as the headline disaster stories of RBS and HBOS. As Simon Denham of Financial Spread recently said, â€Many were only forced into raising capital to comply with the increased demands of the regulators. Now that much of the competition has been swept away, especially in the investment bank sector, it now seems that some players only have to blink and the money flows in. â€Domestic UK banks are likely to continue to suffer as their loan books decay but the fact is that most units within the square mile are not, now, directly exposed to this problemâ€.
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