Lloyds Banking Group CEO warns of UK's investability problem after landmark motor finance ruling

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Lloyds Banking Group chief executive Charlie Nunn has warned that uncertainty surrounding the UK motor finance industry risks making Britain less attractive to international investors, as lenders confront potentially substantial compensation costs from disputed commission arrangements.

The controversy intensified after the Court of Appeal ruled in October 2024 that car dealers acting as credit brokers could not lawfully receive certain commissions from lenders without adequate disclosure to customers. The decision prompted lenders including Close Brothers and FirstRand to appeal to the Supreme Court.

Lloyds, which owns major motor finance provider Black Horse, had already set aside £450 million in February 2024 for potential costs arising from the Financial Conduct Authority’s review of historical car finance commission arrangements.

Nunn said, "The situation makes the UK financial system and Lloyds less investable", warning that greater uncertainty could increase the bank’s cost of capital and restrict its ability to support the wider economy.

Speaking separately at the World Economic Forum in Davos, Nunn said Lloyds wanted the motor finance market to continue to support customers well, while ensuring the UK could remain an investable location for global capital.

Chancellor Rachel Reeves sought permission for the Government to intervene in the Supreme Court proceedings amid concerns that a broad interpretation of the earlier ruling could increase borrowing costs and disrupt access to vehicle finance.

Nunn welcomed the intervention saying, "We welcome the government getting involved in the Supreme Court hearing."

The dispute has become a major test of how the UK balances consumer protection with regulatory certainty as policymakers seek to strengthen Britain’s competitiveness as a global financial centre.