ANOTHER rise in interest rates – announced today (Thursday August 3) by the Bank of England – could have a ’severe’ impact on small businesses, according to business leaders in Coventry and Warwickshire.
The bank has increased the interest rate by 0.25 per cent to 5.25 per cent – the 14th consecutive rise – in a bid to keep inflation under control.
As well as being bad news for homeowners struggling to keep up with rising mortgages, the Coventry and Warwickshire Chamber of Commerce says the decision also spells trouble for small and medium sized businesses (SME) who are currently battling a host of issues.
Chief Executive Corin Crane said: “This latest rise had been forecast, but owners of small businesses would have been desperately hoping it didn’t become a reality.
“Small businesses are battling to keep afloat never mind move forward, and this decision will continue to affect their day-to-day costs.”
He said it led to continued uncertainty while businesses were dealing with rising energy bills, global supply chain problems, recruitment and skills issues, a flat economy and inflation.
“Businesses desperately need policies that drive growth and reduce costs and the continuous, month by month rise in interest rates is becoming an incredibly blunt instrument to battle inflation that does little to help our local economy,” he added.
Vicky Pryce, a member of the British Chambers of Commerce Economic Advisory Council, said the economic environment was becoming stacked against smaller firms.
“They are the ones with less cash reserves in the bank and greater exposure to finance,” she said.
“There is now a real danger that the economy could be pushed into recession, as it takes 18 months for interest rate rises to filter through.
“With all the cumulative pressure of past rises yet to come, business will be watching closely for any further indications on the Bank’s plans.”