Interest rate uncertainty for businesses

West & North Yorkshire Chamber of Commerce today says the decision not to lower interest rates will mean more uncertainty for businesses.

The Bank of England’s Monetary Policy Committee decided this week to keep interest rates at 5.25 per cent, a move that was widely anticipated.

Mark Casci, head of policy and representation at the Chamber, said: “While expected, the decision to freeze interest rates at 5.25 per cent will be disappointing for businesses.

“The cost of borrowing is at a generational high and is particularly damaging for manufacturers in our region, 70 per cent of whom at our last count cited it as the main external pressure point.

“While borrowing costs remain so high, the capacity for investment among our business community will remain limited.

“As inflation continues to ease quicker than anticipated, we hope to see the cost of borrowing reduce at the next meeting of the MPC.”

David Bharier, Head of Research at British Chamber of Commerce, said: “Today’s decision to hold interest rates at 5.25% was widely expected. However, it prolongs the period of uncertainty for firms grappling with high borrowing costs.

“Our recent survey of more than 1,000 UK businesses found a third of report a direct negative impact of the current rate, while around one-in-ten are positively impacted. This largely comes down to businesses weighed down by borrowing costs versus those with surpluses to invest. Smaller businesses, and those in sectors such as hospitality and retail, are more likely to be in a precarious state.

“While yesterday’s inflation data showed a further easing, most small businesses know that the economy remains fragile. The interest rate is itself a driver of inflation, as housing, rental, and borrowing costs continue to rise.

“Our most recent forecast expects some cuts to the base rate going forward, potentially falling to 4.5% by the end of the year. But in the meantime, businesses need reassurance from policymakers that there is a clear plan to drive much needed economic growth.”