HSBC cuts UK growth forecast as profits jump and windfall tax calls grow
HSBC has lowered its UK growth forecast on the eve of the Budget after reporting a sharp rise in profits, prompting renewed calls for a windfall tax on banks.
HSBC has lowered its forecast for UK economic growth on the eve of the Budget, even as the bank reported a sharp rise in profits that has prompted fresh calls for a windfall tax on the sector.
The lender's quarterly results showed a 32 per cent rise in profits, a figure that has drawn attention from left-wing politicians and campaigners who argue that banks should contribute more to public finances. The timing of the announcement, just ahead of the Chancellor's Budget statement, has sharpened that debate and put the bank's earnings at the centre of the political conversation about how the Treasury should raise revenue.
Pam Kaur, the banking group's chief financial officer, said there was « no pressure » on the bank despite facing the prospect of higher costs. Her remarks came as the group weighed the implications of possible changes to taxation in the Budget, a move that could affect the wider banking industry as well as HSBC itself. Kaur's comments suggested the bank was prepared to absorb new costs without changing its position, though she did not set out specific figures for how any tax change would affect its accounts.
The downgrade to UK growth expectations signals a more cautious outlook for the British economy at a time when households and businesses are still adjusting to higher borrowing costs and uncertainty over government policy. For a bank with a large UK presence, the forecast carries direct implications for lending demand, credit quality and future earnings. A weaker economy typically means fewer new loans, more pressure on borrowers and a greater risk of defaults, all of which feed into a lender's outlook.
Calls for a bank levy are not new. Successive governments have debated whether lenders should pay more when profits rise sharply, with supporters arguing that the sector benefited from high interest rates while many borrowers struggled with rising living costs. Opponents counter that heavier taxation could reduce investment, constrain lending and push costs onto customers, arguments that are likely to resurface as the Budget approaches.
Political pressure on the issue has been building in the run-up to the Budget. Campaigners and opposition voices have pointed to the scale of the bank's profit growth as evidence that the sector can afford to contribute more, while industry representatives have warned against measures that could weaken the City's competitiveness. The debate has therefore become less about whether banks are profitable and more about how the government should share the gains of an uneven economic recovery.
The coming Budget is therefore likely to be closely watched by the banking sector, investors and policymakers. Whether the government responds to the renewed pressure for a windfall tax will be a key test of how it balances public revenue needs against the health of the financial industry and the wider economy.
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