UK (Parliament Politics Magazine) – HSBC CEO Georges Elhedery warns the UK economy could suffer if bank taxes rise, as profits fall 29% due to economic challenges in China and Hong Kong.
As reported by The Guardian, HSBC’s chief expressed concern shared by top bankers, warning that Chancellor Rachel Reeves‘ proposed bank tax hike could undermine investment and harm economic growth.
What did Georges Elhedery warn about Rachel Reeves’ tax plan?
Georges Elhedery stated that Britain already imposes some of the highest tax burdens on its banks. He warned that adding further pressure could undermine economic stability.
Mr Elhedrey stated, “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 HSBC remained optimistic about the UK’s economic prospects. The country, he noted, had shown “strong resilience in recent years.”
Mr Elhedrey added,
“We continue to see strong resilience across credit outlook indicators and obviously across matters such as employment, the reduction of inflation, all of which give us significant room to be more optimistic about the outlook.”
He also pointed to recent wins in securing free trade deals, adding,
“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.”
HSBC reported a significant decline in profits, impacted by troubles in China’s banking sector and Hong Kong’s property market. The announcement came alongside remarks from the company’s leadership.
How much more could UK banks pay under new tax plans?
Rachel Reeves is under pressure to raise taxes, as worsening public finances fuel fresh speculation over new revenue measures.
Despite avoiding targeted tax hikes so far, British banks could soon face new charges. In May, Deputy Prime Minister Angela Rayner urged the chancellor to consider wealth taxes, including a higher corporation tax for banks.
Banks in the UK currently pay a 25% corporate tax rate. In addition, they face a 3% surcharge and a separate levy on certain balance sheet assets.
Data from UK Finance and PwC reveal that British banks face a total tax rate of 45.8%, including VAT and employment taxes. In comparison, banks in Frankfurt pay 38.6%, while in New York the rate is just 27.9%.
The Labour government included financial services in its list of key sectors. The chancellor later unveiled measures aimed at cutting regulation and boosting industry growth.
How did HSBC lose $2.1bn on its China stake?
HSBC, based in London, announced a $2.1bn write-down. The loss is tied to its investment in China’s Bank of Communications.
The value of HSBC’s stake was reduced by a recapitalisation plan launched to ease pressure from China’s weak economy and property downturn. It’s the second charge related to BoCom, following a $3.1bn loss recorded last year.
It reported a $400m charge due to “challenging market conditions” in Hong Kong’s commercial real estate sector. It cited the risk of defaults and warned that “the oversupply of nonresidential properties [is] putting continued downward pressure on rental and capital values.”
HSBC’s pre-tax profits declined 29% to $6.3bn in the second quarter, hit by impairment costs. This compares to $8.9bn during the same period in 2024.
The bank announced further returns to shareholders, pointing to strength in its broader operations despite the recent profit decline. It plans to issue a 10-cent dividend and carry out a share buyback ahead of its third-quarter results in late October.
What did Barclays’ CEO say about taxing banks in the UK?
Barclays’ chief has urged Rachel Reeves not to raise taxes on UK companies, warning it could derail the country’s economic expansion plans.
CS Venkatakrishnan said, “If growth is the primary objective for the UK, higher taxation of businesses is not a path towards that growth. Banks are among the bigger taxpayers in the country.”
He stated, “Growth has been an important objective of the UK economy and we want good quality growth, which is fuelled by the important sectors of the economy.”
Mr Venkatakrishnan added, “Banks are one of them and not the only one. There are many other important sectors – biotech, pharma, technology itself – and we want all of these sectors to prosper. And in our prosperity and in our growth lies the growth of the country.”