HSBC has cut its economic growth forecasts for the UK the day before John Healey's first Budget .
The bank trimmed its gross domestic product (GDP) growth estimates for 2027 to 1.1pc on Tuesday. It warned the economy would slow thanks to the effects of higher inflation and interest rates on consumer spending and the housing market.
That is down from a forecast of 1.4pc at the start of the year and lower than the 1.2pc the bank estimated in its last quarterly results in August.
HSBC said: "In the UK, the outlook has deteriorated and GDP growth forecasts are lower."
Under the bank's central scenario, it now expects unemployment to rise to 5.2pc, up from earlier estimates of 4.7pc.
The downgrade came as HSBC announced a 32pc increase in pre-tax profits to $9.6bn (£7.2bn) for the three months to Sept 30, with speculation that the Chancellor will launch a raid on bank profits in Wednesday's Budget.
One proposal would see an increase in the corporation tax surcharge on banks from 3pc to 8pc.
The New Economics Foundation, a think tank formerly run by Miatta Fahnbulleh, the Energy Secretary, warned that the current proposal falls short. Abhijay Sood, an economist at the group, said increasing the corporation tax surcharge was "unlikely to go far enough" and called for even more aggressive action.
Pam Kaur, HSBC's chief financial officer, said that regardless of a bank tax, HSBC planned to remain domiciled in the UK.
She said: "The UK is our home market, our focus in the UK is supporting customers with their growth ambitions.
"I'm not going to speculate on the Budget, we only have 24 hours to go. We are very encouraged [by] the UK's growth agenda."
HSBC has been undergoing a major overhaul of its business following the appointment of Georges Elhedery as chief executive in Sept 2024.
The bank has since shuttered, sold or merged several of its businesses and cut thousands of jobs , many of which were in the UK.
HSBC said it had made savings of $1.9bn so far this year, coming close to its target of $2bn in cuts by the end of the year.
The lender said earlier this month that it planned to use AI to cut its number of UK financial advisers by around 70pc.
HSBC's shares fell after its increase in profits came in slightly below analyst estimates. The bank reported a 5pc increase in revenues to $18.6bn.
Shares in HSBC dropped by as much as 7pc on Tuesday.
HSBC's profits were flattered by the fact the bank was forced to set aside $1.1bn in 2025 for payments related to the Bernie Madoff scandal, weakening last year's figures and making this year's look stronger by comparison.
The bank added it would launch a new share buyback of up to $1bn.
Unions have urged Labour to launch a bank tax raid to support families and businesses during the cost of living crisis.
Paul Nowak, the general secretary of the Trades Union Congress, said: "These results make it blatantly obvious banks can afford to contribute more."
