Citigroup chief executive Dame Jane Fraser has warned the UK government that "money votes with its feet," cautioning that there are "very viable" alternatives to London if policymakers move to impose higher taxes on the banking sector.

Fraser, a Scottish-born banker widely credited with orchestrating the turnaround of the third-largest bank in the United States, said she was "concerned" at the prospect of another charge on banks operating in Britain. She argued that maintaining a base in the UK had grown increasingly difficult to justify, given the outsized tax burden placed on the sector relative to competitors such as Germany, France, and the US.

"Money votes with its feet," Fraser told reporters. "And when you have a tax rate in London which is up around to the 48 per cent level and you're competing with New York at 27 per cent, or Dublin at about 28 per cent – even Frankfurt and Paris are lower – it makes it a tougher decision. It's already one of the most expensive centres in the world."

That figure reflects the layering of the UK's 25 per cent corporation tax, raised in 2023, on top of the sector-specific Bank Surcharge that has applied to lenders' profits since 2016. The combined burden has been a persistent grievance for the industry, and one that has sharpened since Brexit prompted some banks to relocate operations and staff to EU financial centres.

Her remarks add to a mounting chorus of concern from senior banking executives following a blockbuster earnings season, in which equity trading and investment banking revenues were driven to near-record highs amid the turbulence sweeping through global financial markets.

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Both Barclays and JP Morgan have already cautioned the government against levying another charge on banks. JP Morgan chief executive Jamie Dimon went so far as to threaten abandoning the American bank's planned Canary Wharf headquarters if UK tax rates became more punitive.

"There are very viable alternatives," Fraser said. "And the UK's important. It's got talent, it's got infrastructure, it's got pretty sensible regulatory capabilities and the like. But that difference – and I hate to be Scottish – it gets overcome pretty quickly."

She also expressed unease about the government's refusal to rule out a potential wealth tax, as well as remarks from current government ministers who have advocated equalising capital gains tax with income tax.

"You can't afford everything. You can't have your cake, eat it, and not put on calories," Fraser said in response to questions from City AM. "I think some of the pieces we've just got to look at [are] how do you re-energize the country around incentivising people for working, making it attractive to do so."

She pointed to the high tax rates that prevailed under the Labour government in the 1970s, describing them as a "disaster for the country."

"You don't grow and you don't build businesses. So I think there's a balance," she said.

Fraser further noted that among American business leaders, there is a perception that the UK has become "diminished," and that recent political instability has dented the country's global standing.

"We want the UK to succeed. We want to see some of the things that have held the country back getting taken down by the government, and that the country is fulfilling its potential," she said.

'Now We've Got to Show What We Can Do'

Fraser's comments come on her first return visit to the UK since being made a dame in the King's birthday honours list in June. They are likely to carry significant weight with the government, given her standing as one of the few Britons to reach the pinnacle of corporate America. Born in St Andrews, her appointment to the top role at Citi in 2021 made her the most powerful woman on Wall Street.

She has been credited with engineering Citi's turnaround by divesting non-core businesses and refocusing the bank on areas where it holds a "right to win" — particularly wealth management, alongside commercial and investment banking. Analysts noted that the bank's latest results offered clear evidence that the overhaul is delivering results. Revenue in its trading division jumped 45 per cent to $2.3 billion in the second quarter, while four of its five main divisions exceeded analyst estimates during the first half of the year.

"It's not just that we got ourselves into shape and we built the engine, now we've got to show what we can do," Fraser said.