UK-based banks contributed 5.5% to government tax receipts

Banks based in the UK contributed 5.5% of government tax receipts in the year ending March 2016, according to a study.

The British Bankers' Association (BBA) said banks paid £34.2bn ($42.6bn) in taxes during the period, a 9.3% increase on the corresponding period for 2014.

The figure included £17.8bn in employment taxes and £3.4bn to cover a bank levy introduced following the financial crisis.

The report was produced by PricewaterhouseCoopers and was compiled using data provided by 36 British and foreign banks.

Some £16.8bn of tax contributions were paid by foreign banks operating in the UK, while British banks paid £17.4bn.

There are fears that London's reputation as a global financial centre could be damaged if the UK loses access to the single market following its exit from the European Union.

A so-called "hard Brexit" would likely mean the loss of passporting rights for British financial institutions, which allow banks based in the UK to offer services to companies and governments across the European Union without restrictions.

This could lead to an exodus of banks from London to other European cities, with Paris, Frankfurt and Madrid among potential destinations.

"It is more important than ever that the UK remains a competitive place to do business for both domestic and foreign banks, with a proportionate and stable tax environment," BBA chief executive Anthony Browne said.

"This matters because banking is the UK's leading export industry, employs over half a million people right across the UK, two thirds of which are based outside London.

"HMRC's own data and PwC's independent work both show that the tax take from banks is at its highest level since 2006," Browne added.

"This comes at a time when banks' revenues are under increasing pressure due to a tough economic environment and uncertainty."