Published: 30 July 2025 | The English Chronicle Desk
The chief executive of HSBC, Georges Elhedery, has voiced a firm warning against potential tax increases on the banking sector, cautioning that such measures could severely impact investment capacity and stunt economic growth in the United Kingdom. His comments arrive amid intensifying speculation that Chancellor Rachel Reeves may use the upcoming autumn budget to raise bank-specific taxes as part of broader efforts to shore up public finances.
Speaking as HSBC reported a 29% drop in its second-quarter pre-tax profits, Elhedery stressed that UK banks are already subjected to some of the highest tax burdens in the world, and further levies would strain institutions’ ability to support businesses and consumers alike. “Additional taxation on banks does run the risk of eroding our continued investment capacity in the business and in supporting our customers, and ultimately in delivering growth for the UK,” he said on Wednesday.
Currently, UK banks are subject to a 25% corporation tax, a 3% bank surcharge, and a further levy on parts of their balance sheets. According to estimates by UK Finance and PwC, this brings the effective tax burden for UK banks to around 45.8%—a rate significantly higher than Frankfurt’s 38.6% or New York’s 27.9%.
Elhedery’s remarks align with similar concerns raised by Lloyds Banking Group’s CEO, Charlie Nunn, who recently argued that increasing taxes on banks would undermine Labour’s aim of leveraging the City of London as a driver of economic renewal. Nunn warned that such a move would contradict the chancellor’s previous pro-growth messaging and dampen the momentum built by recent deregulatory efforts under the Labour government’s industrial strategy.
Despite the backdrop of declining quarterly profits, Elhedery expressed optimism about the UK’s broader economic outlook. He praised the country’s resilience across several economic indicators, including falling inflation, robust employment, and a stable credit environment. He also acknowledged the UK’s proactive pursuit of international trade deals, highlighting the vibrant commercial corridor between the UK and India as a key opportunity for growth. “Frankly, UK-India is one of our most vibrant corridors, and we’re really looking forward to supporting our clients [to] realise the full benefits of this FTA,” he said.
However, HSBC’s latest financial report cast a shadow over these optimistic signals. The bank disclosed a significant $2.1bn impairment linked to its investment in China’s Bank of Communications (BoCom), reflecting the ongoing turmoil in China’s property market and a broader economic slowdown. This follows a $3.1bn write-down related to BoCom last year. Additionally, HSBC incurred a $400m charge tied to mounting risks in Hong Kong’s commercial real estate sector, where oversupply has led to a drop in rental and capital values.
These impairment costs led to a sharp decline in quarterly pre-tax profits, down to $6.3bn from $8.9bn in the same period last year. Despite this, the bank remained committed to shareholder returns, announcing a 10-cent dividend and a share buyback programme of up to $3bn to be completed before third-quarter results are revealed in October.
As the UK government weighs tough fiscal decisions ahead of the autumn budget, the message from the nation’s banking leaders is clear: higher taxes on financial institutions could come at the cost of economic recovery. Whether the chancellor will heed these warnings remains to be seen, but the tension between fiscal necessity and private sector stability is once again at the forefront of national debate.
