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HSBC cut its UK GDP growth forecast for 2027 from 1.4% to 1.1%, citing a deteriorating outlook, while reporting a 32% rise in third-quarter pre-tax profit to $9.6 billion. The results have renewed calls for a higher tax on banks ahead of the Budget, but the proposed surcharge and its eventual effects on lenders and customers remain unconfirmed.
HSBC cut its UK growth forecast for 2027 to 1.1% from 1.4%, saying the outlook had deteriorated, as its third-quarter pre-tax profit rose 32% to $9.6 billion. The results landed ahead of the Budget, when the government is expected to consider raising the surcharge on bank profits amid calls for lenders to contribute more.
The bank said higher inflation and interest rates were weighing on consumer spending and the housing market. It gave no further detail in the report about the size or timing of the forecast change beyond lowering its 2027 estimate. The revised projection is a forecast, not a confirmed outcome for the UK economy.
HSBC also announced plans for a $1 billion share buyback. Group revenue rose 5% to $18.6 billion, below analyst estimates, according to the report. Revenue in its wealth division was flat at $2.7 billion, following stronger year-on-year growth in the first two quarters. HSBC shares in London fell 7% on the day, the report said, amid the wealth performance and broader investor concerns.
The bank’s UK operations recorded $1.8 billion in third-quarter profit. UK profits for the first nine months of the year totalled $5.2 billion, up 8% on the same period in 2025, according to the source report. HSBC’s UK business accounts for about a fifth of its stated $29.2 billion total profit for the year to date; the group’s operations are heavily focused on Asia.
Growth Outlook Meets Bank-Tax Debate
The development puts two issues facing households and policymakers side by side: a major bank’s more cautious view of UK growth and the argument over whether profitable lenders should pay more tax. HSBC’s forecast cut reflects its assessment of economic conditions; it does not establish that the economy will grow at that rate or identify how much of the change is due to any single policy.
The tax decision could matter beyond bank accounts. Industry body UK Finance has warned that lenders might respond to a higher surcharge by raising mortgage or loan prices, or reducing what they offer, to protect margins. That is a warning about possible consequences, not evidence that customer rates have already changed because of a new tax. Any eventual effect would depend on the measure’s design and how banks respond.
The debate also involves the balance between raising public revenue and maintaining the UK’s appeal as a place to do business. Supporters of a higher levy argue that recent bank profits leave scope for a larger contribution. Bank representatives have warned that extra costs could weigh on investment and growth. The Budget decision will determine whether that dispute moves from political pressure to policy.
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Profits, Rates and the Proposed Surcharge
Bank profits have benefited in recent years from higher interest rates, which can widen the difference between what lenders earn on loans and pay on deposits. That difference, known as net interest income, is one measure of lending profitability. HSBC’s UK net interest income rose 6% year on year to $3.2 billion in the third quarter, the report said. Group net interest income was $9.3 billion.
Campaigners and trade unions have pressed the government to raise the bank surcharge. The report said the Chancellor was expected to increase it from 3% to 8%; the Trades Union Congress has called for a rise to 16%. These are proposed rates, not a confirmed Budget decision. HSBC is expected to be less exposed than some domestic lenders if a higher charge applies to UK profits, because much of its business is overseas.
The report also cited UK Finance’s comparison of overall bank tax rates, including employment levies and VAT: 46.5% in the UK, against 39.1% in Frankfurt and 27.9% in New York. Those figures are the trade body’s estimates and depend on the taxes included in its calculation.
““In the UK, the outlook has deteriorated and GDP growth forecasts are lower.””
— HSBC
Budget Details and Customer Effects
The final surcharge rate, its scope and the date it would take effect were not confirmed in the source report. It is also unclear how any increase would apply across banks with different shares of UK and international business. HSBC finance chief Pam Kaur said moving the bank’s headquarters from London was “just not on the table,” but that statement does not settle the wider question of how the bank might adjust its UK operations.
The report did not establish that a higher bank tax would lead to higher mortgage rates, reduced lending or lower investment. Those outcomes were raised as possible risks by industry representatives. Nor did it provide details confirming reports of potential job cuts in HSBC’s UK wealth-management unit. Kaur declined to comment on those reports.
The reasons behind HSBC’s forecast revision were described in broad terms, including inflation and interest rates. The report did not quantify their separate effects or explain how the bank’s projection compares with other forecasters’ estimates.
Budget Decision and Bank Response
The immediate next development is the Chancellor’s Budget announcement, expected on Wednesday according to the report. It should clarify whether the surcharge will rise, the rate selected, which profits are covered and when any change would begin. Until those details are published, the reported 8% figure remains an expectation rather than enacted policy.
After the announcement, lenders and industry groups are likely to assess the effect on their tax bills and business plans. Investors will also watch for further information from HSBC on UK trading, costs and its wealth business. Any consequences for mortgage pricing, lending or investment will take time to establish; the warnings made before the Budget do not confirm that those changes will occur.
Key Questions
What UK growth forecast did HSBC change?
HSBC lowered its forecast for UK GDP growth in 2027 from 1.4% to 1.1%. The bank attributed the weaker outlook to higher inflation and interest rates affecting consumer spending and the housing market.
How much did HSBC make in the third quarter?
HSBC reported $9.6 billion in third-quarter pre-tax profit, a 32% rise, and announced a planned $1 billion share buyback.
Has the government confirmed a higher bank surcharge?
No. The report said a rise was expected ahead of the Budget, but the rate and details had not been confirmed. The reported 8% figure was an expectation; the TUC has separately called for 16%.
Could a bank tax increase raise mortgage costs?
UK Finance warned that banks might pass some costs to customers through higher mortgage or loan prices, or reduce what they offer. That is a possible effect cited by the industry body, not a confirmed outcome.
Source: rss
