Britain's four largest banks amassed nearly £14 billion in profits during the first three months of 2025, according to recent financial reports. HSBC completed the quartet of bumper results on Tuesday, announcing a £6.9 billion profit for the quarter. This follows strong performances from Barclays, NatWest, and Lloyds Banking Group, all of which have benefited from expectations of prolonged higher interest rates due to the economic repercussions of the Iran conflict. In 2025, the big four banks collectively generated profits of £45.7 billion.
TUC Renews Call for Bank Surcharge Increase
The Trades Union Congress (TUC) has seized on the profit bonanza to renew its demand for an increase in the bank surcharge tax. The TUC argues that raising the surcharge could generate substantial revenue for the government over the coming years, helping to bolster public finances. Currently, the bank surcharge is an additional 3% corporation tax applied to banking sector companies with taxable profits exceeding £100 million. This rate was reduced from 8% in April 2023 by the Conservative government.
The TUC asserts that lenders have profited from higher net interest margins—the difference between what they pay savers and charge borrowers—as well as interest paid on reserves held at the Bank of England. The union claims that reversing the Tory cut could raise £9 billion over the next four years. Moreover, if the surcharge were set at 35%, matching the windfall tax imposed on energy companies, it could generate between £35 billion and £60 billion.
Profit Breakdown and Economic Context
The £13.8 billion in first-quarter profits includes £2 billion from Lloyds Banking Group, whose profits surged by a third. HSBC's profit of £6.9 billion was down 1% from the same period last year, partly due to provisions for potential loan losses stemming from the Iran war. HSBC also raised its forecast for net interest income to £34 billion for the year, citing an improved interest rate outlook.
TUC General Secretary Paul Nowak said: “Getting banks to pay more tax on their profits is plain common sense when they’re raking in billions and the rest of the country is struggling to get by. After the Tories cut the bank surcharge tax, banks enjoyed a profits bonanza because of high interest rates. Now they could be set to make even more if interest rates remain high for longer. With Donald Trump’s illegal war abroad unleashing economic chaos at home, it’s only right that banks’ bumper profits are taxed fairly and used to shield households and firms from the damaging impacts of the war.”
Nowak added: “The last economic shock caused by Putin’s illegal invasion in Ukraine led to a bumper pay day for banks at the expense of mortgage payers – we can’t allow the same thing to happen again.”
Criticism from Campaign Groups
Sara Hall, co-executive director of the campaign group Positive Money, criticized the government's approach: “Keeping rates higher for longer will do little to deal with inflation from abroad, but will mean huge transfers from the public to banks, not just through their own increased borrowing costs, but from the higher interest the central bank pays to banks - a cost ultimately borne by the Treasury to the tune of £20 billion a year. If the government wants to take action on borrowing costs, it should recoup payouts to banks with a windfall tax on the record profits they have made without lifting a finger. This is a hugely popular policy which would go a long way towards showing frustrated voters that the government is willing to put their interests above those of big corporations like banks.”
