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HSBC cut its UK GDP growth forecast for 2027 from 1.4% to 1.1%, citing a deteriorating outlook, higher inflation and interest rates. The revision came as the bank reported third-quarter pre-tax profits of $9.6 billion and the government faces pressure to raise the bank surcharge in the Budget. The proposed tax change has not been confirmed, and the effect on lending and customers remains uncertain.
HSBC cut its forecast for UK GDP growth in 2027 to 1.1% from 1.4%, saying the economic outlook had deteriorated as inflation and interest rates weigh on spending and the housing market. The revision came ahead of the Budget, as ministers face calls to raise taxes on banks following HSBC’s report of $9.6 billion in third-quarter pre-tax profit.
HSBC said its UK outlook had worsened, but the supplied results do not specify how much of the forecast revision is attributable to inflation, borrowing costs or weaker housing activity. The bank’s stated concerns include pressure on consumer spending and the housing market, both of which are sensitive to interest rates. The forecast change is an assessment, not a report that UK output has already fallen.
HSBC’s group pre-tax profit rose 32% to $9.6 billion in the third quarter. It also announced a $1 billion share buyback, returning cash to investors. Group revenue increased 5% to $18.6 billion, though the source says that was below analyst expectations, partly because growth in the wealth business slowed. Wealth division revenue was flat at $2.7 billion, and HSBC shares fell 7% in London on the reported results.
HSBC’s UK business made $1.8 billion in third-quarter profit. Its UK profits for the first nine months of the year reached $5.2 billion, up 8% on the same period in 2025, according to the source. The UK arm represents about a fifth of the group’s stated $29.2 billion profit for the year to date. Separately, net interest income at HSBC UK rose 6% year on year to $3.2 billion in the quarter, while the group figure was $9.3 billion.
Growth Forecast Meets Bank Tax Debate
The forecast cut adds to scrutiny of the government’s choices ahead of the Budget: raising revenue from banks could help fund public spending, while a weaker outlook makes the consequences for investment and borrowing costs part of the debate. HSBC’s profit figures are likely to reinforce arguments from campaigners and trade unions that lenders can contribute more. They do not, on their own, establish what a tax increase would raise or how banks would respond.
The proposed change under discussion is an increase in the bank surcharge, described in the source as potentially rising from 3% to 8%. The Trade Union Congress is calling for a higher rate of 16%. Those figures are proposals, not confirmed Budget policy. Bank executives and UK Finance have warned that higher taxes could affect lending, mortgage pricing and the UK’s attractiveness to financial firms. These are predictions from industry representatives, not confirmed outcomes.
HSBC may be less exposed than lenders whose earnings are more concentrated in Britain, because the group makes most of its money outside the UK and a reported surcharge would apply to UK profits. That difference matters to how the policy could affect individual banks, but the source does not provide a final tax design or a full estimate of each lender’s liability.
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Why Bank Profits Have Recovered
Bank earnings have benefited in recent years from higher interest rates. When lending rates rise faster than the rates banks pay on customer deposits, the difference can increase net interest income, a key measure of lending profitability. HSBC UK’s net interest income rose in the third quarter, although the source also reports that an economist attributed the group’s profit jump to cost cuts and fewer one-off charges, rather than interest rates alone.
The debate is not limited to HSBC. The source says Chancellor John Healey is expected to consider a surcharge increase in the Budget, while banks have opposed an additional levy. UK Finance has argued that UK banks already face a high overall tax burden, estimating a 46.5% rate when employment levies and VAT are included, compared with 39.1% in Frankfurt and 27.9% in New York. These are figures attributed to the trade body and depend on its comparison and methodology.
HSBC’s results also contained weaker signals alongside the profit increase. Its wealth division recorded flat revenue, and the bank’s shares fell after the update. The combination of a lower UK growth forecast, strong reported profits and softer performance in one business area makes the Budget debate more complicated than a simple comparison between bank earnings and tax proposals.
““In the UK, the outlook has deteriorated and GDP growth forecasts are lower.””
— HSBC
Budget Tax Plan Still Unconfirmed
The source describes a surcharge increase as expected or widely discussed, but it does not establish that the government has adopted a final policy. The precise rate, scope, start date and treatment of different banks remain unconfirmed in the material provided. It is also not clear how much additional revenue a change would raise.
HSBC’s growth forecast is a projection, and the source gives no detailed assumptions, probability range or forecast for 2026. The scale of any effect on household borrowing is also unknown. UK Finance warns that lenders may respond through mortgage rates, savings rates or tighter lending standards, while bank executives warn of effects on investment and growth; none of those possible responses is shown as having happened as a result of a new tax.
The source also reports that HSBC finance chief Pam Kaur dismissed the idea that the bank might move its headquarters from London, saying it was “just not on the table.” Kaur declined to comment on reports of planned job cuts in the UK wealth business. Those reported cuts therefore remain unconfirmed in the information available here.
Budget Decision and Forecast Updates
The immediate next development is the government’s Budget announcement, when the Chancellor is expected to set out tax and spending measures. The surcharge rate and rules will determine whether the proposal becomes policy and how much of HSBC’s UK business, as well as other domestic lenders, is affected. Until the announcement, the proposed rates should be treated as speculation or advocacy rather than a confirmed change.
Investors and customers will also be watching how banks describe any response to the final policy. Mortgage pricing, savings rates, lending criteria and investment plans are among the areas raised by UK Finance and bank executives, but no specific changes are confirmed. Further company results and updated economic forecasts may clarify whether HSBC’s concerns about inflation, interest rates and housing are feeding into a broader reassessment of UK growth.
Key Questions
What growth forecast did HSBC cut?
HSBC lowered its UK GDP growth forecast for 2027 from 1.4% to 1.1%. It said the UK outlook had deteriorated, citing pressure from inflation and interest rates on spending and the housing market.
How much profit did HSBC report?
HSBC reported $9.6 billion in third-quarter pre-tax profit, up 32% from the year-earlier quarter, and announced a $1 billion share buyback.
Has the government confirmed a higher bank surcharge?
No. The source describes possible increases as expected or proposed ahead of the Budget. It says a rise from 3% to 8% is under consideration, while the TUC is advocating 16%; neither figure is confirmed as the government’s final decision.
Could a higher bank tax affect mortgage or savings customers?
UK Finance has warned that banks could respond with higher mortgage rates, less competitive savings rates or tighter lending standards. These are possible effects cited by the industry body, not confirmed changes to customer products.
Why might HSBC be less affected than some UK banks?
The source says HSBC makes most of its money outside the UK, so it may be more insulated if the surcharge applies to UK profits. The final policy design and each bank’s eventual tax liability are not yet known.
Source: rss
