Background: The incidence of hepatocellular carcinoma (HCC) in the UK has increased by 40% over the last 20 years, with a corresponding increase in mortality rate. The rising incidence of obesity and type II diabetes are believed to be contributing factors due to the association with non-alcoholic fatty liver and steatohepatitis. We aimed to examine if diabetes was as an independent risk factor for the development of HCC and to assess the impact of diabetes on overall survival (OS). Methods: Data from 724 patients with HCC and a control group comprising 340 patients with chronic liver disease were collected prospectively between 2007 and 2012. The odds ratio (OR) for HCC in diabetic versus non-diabetic patients was calculated. Univariate and multivariate analysis was performed using logistic regression. Cox proportional hazards analysis was used to estimate hazard ratio (HR) for death for HCC patients, with and without diabetes and for the impact of variation in diabetic treatments. Results: The prevalence of diabetes was 39% within the HCC population and 10.3% within the chronic liver disease group. Univariate analysis demonstrated increased risk of HCC associated with age, sex, diabetes, haemochromatosis, cirrhosis, alcohol abuse and Child’s score. In patients with diabetes OR for HCC was 5.74 (CI 3.9-8.3; p<0.001). Age, sex, cirrhosis, Child’s score, diabetes and diabetes treatment with insulin, retained significance as independent risk factors in multivariate analysis. There was no survival difference for HCC patients with and without diabetes. In diabetic patients with HCC, treatment of diabetes with metformin, compared against other diabetic treatment options, was associated with a significantly longer OS (31 versus 24 months, p = 0.016; HR 0.74, p = 0.027). Conclusions: This study has demonstrated that diabetes is an independent risk factor for the development of HCC in a high risk population and that treatment with insulin appears to confer further independent risk. Diabetes has no effect on survival following the development of HCC but treatment of diabetes with metformin is associated with prolonged survival. In considering the optimal treatment for diabetes in chronic liver disease the beneficial effects of metformin on OS, if HCC develops, should be taken into account.