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HSBC lowered its forecast for UK GDP growth in 2027 from 1.4% to 1.1%, citing a deteriorating outlook. The bank also reported third-quarter pre-tax profit of $9.6 billion, up 32%, prompting renewed calls for a higher tax on banks ahead of the Budget. The proposed surcharge, its final rate and any effects on borrowers remain uncertain.
HSBC cut its forecast for UK economic growth in 2027 from 1.4% to 1.1%, saying the outlook had deteriorated, as its third-quarter pre-tax profit rose 32% to $9.6 billion and calls grew for banks to pay more tax ahead of the Budget. The juxtaposition has sharpened debate over whether a higher bank surcharge could raise public revenue without weakening investment or adding costs for borrowers.
HSBC attributed its lower UK growth outlook to higher inflation and interest rates, which it said are weighing on consumer spending and the housing market. The bank said the UK outlook had “deteriorated” and its growth forecasts were lower. The report does not specify a revised forecast for other years or provide a detailed breakdown of the expected effects on households and businesses.
The lender reported group revenue of $18.6 billion, up 5% year on year, while pre-tax profit reached $9.6 billion. It also announced a $1 billion share buyback. Revenue in its wealth division was flat at $2.7 billion, and the report said HSBC’s London-listed shares fell 7% amid concerns about the division’s performance. The results reportedly fell short of market expectations.
HSBC’s UK business recorded $1.8 billion in third-quarter profit. Its profit for the first nine months of the year was $5.2 billion, up 8% on the same period in 2025, according to the report. The UK arm accounts for about a fifth of HSBC’s reported $29.2 billion in profit this year. HSBC makes much of its business outside Britain, a factor that could leave it less exposed to a surcharge applied to UK profits than some domestic-focused lenders.
Growth Forecast Meets Bank Tax Debate
The development puts two competing concerns at the centre of the Budget debate: the need for tax revenue and the risk that extra costs for banks could affect the wider economy. Campaigners and trade unions argue that strong bank profits give lenders room to contribute more. Bank representatives and industry groups warn that a higher levy could reduce investment or be passed on through borrowing costs.
Those outcomes are not established. UK Finance has warned that banks could respond to a tax increase by raising mortgage rates or offering less favourable lending terms, but the available report does not show that lenders have made such changes in response to a policy that has yet to be confirmed. The dispute matters to households because mortgage pricing and access to loans can affect monthly budgets and home purchases, while business borrowing can influence investment.
HSBC’s figures also complicate the argument that higher profits simply reflect interest rates. Higher rates have widened the difference between what banks earn on loans and pay on deposits, but economist Julian Jessop said cost reductions and fewer one-off charges were key factors in HSBC’s profit increase. That distinction matters to policymakers weighing whether the reported profit surge is a lasting basis for a tax change.
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How the Proposed Surcharge Fits
The Budget dispute centres on the bank profits surcharge, an additional tax on profits from banking activity in the UK. The report says Chancellor John Healey is expected to raise the surcharge from 3% to 8%, though the proposal had not been confirmed at the time of reporting. The Trades Union Congress has called for a larger increase, to 16%.
HSBC is a global lender with substantial Asian operations, so a charge limited to UK profits could affect it differently from banks with a greater share of business in Britain. UK Finance argues that the UK already imposes a comparatively high overall tax burden on banks: it cites a rate of 46.5% once employment levies and VAT are included, compared with 39.1% in Frankfurt and 27.9% in New York. These comparisons are the industry body’s figures and depend on the taxes included.
Interest rates form part of the wider backdrop. Banks’ net interest income—the gap between income from lending and costs such as paying interest on deposits—has benefited from rates remaining elevated. HSBC’s UK net interest income rose 6% year on year to $3.2 billion in the quarter, according to the report. The figures provide context for the tax argument but do not, on their own, determine how much tax the bank should pay.
“In the UK, the outlook has deteriorated and GDP growth forecasts are lower.”
— HSBC
Budget Rate and Borrower Effects
The final surcharge rate and its scope remain unconfirmed in the available reporting. It is not clear whether the Budget will adopt the reported increase from 3% to 8%, make a different change, or specify how the tax would apply across banks with international operations.
The potential consequences for mortgage rates, other loans, investment and employment are also uncertain. Industry warnings describe possible responses, not confirmed decisions by lenders. The report gives no estimate of how much a higher surcharge would raise for the government or how much of any cost banks might pass on to customers.
HSBC also declined to comment on reports of planned job cuts in its UK wealth-management business linked to a push into artificial intelligence. The company’s remarks do not confirm that cuts are planned. Its finance chief said AI is intended to assist people, rather than necessarily replace them.
Budget Decision and HSBC Follow-Up
The immediate milestone is the Budget announcement expected on Wednesday. The Chancellor’s statement should clarify whether the bank surcharge will change, the rate proposed and how the measure would be applied. Until then, expectations about an increase remain reports and forecasts rather than confirmed policy.
Investors and borrowers will be watching for details on implementation and for any response from lenders. HSBC’s results and subsequent disclosures may shed more light on its UK outlook, wealth business and approach to costs. The available report does not identify a confirmed timetable for any reported workforce changes, and no specific decisions on mortgage or loan pricing have been announced.
Key Questions
What UK growth forecast did HSBC cut?
HSBC lowered its forecast for UK GDP growth in 2027 from 1.4% to 1.1%. It cited a deteriorating outlook, including higher inflation and interest rates affecting consumer spending and the housing market.
How much profit did HSBC report?
HSBC reported third-quarter pre-tax profit of $9.6 billion, up 32% from a year earlier. The bank also announced a $1 billion share buyback.
What bank tax change is being discussed?
The report says the Chancellor is expected to raise the bank profits surcharge from 3% to 8%. That proposal had not been confirmed at the time of reporting; the Trades Union Congress is calling for a 16% rate.
Could a higher surcharge increase mortgage costs?
UK Finance has warned that banks could pass some added costs to customers through higher mortgage rates or less favourable lending. That is a warning about a possible effect, not a confirmed outcome or a pricing change announced by HSBC.
Is HSBC planning to move its headquarters or cut UK jobs?
HSBC finance chief Pam Kaur said moving the headquarters from London was “not on the table.” She did not comment on reports of possible job cuts in the UK wealth-management unit, so those reports remain unconfirmed.
Source: thisismoney.co.uk
