Commenting on today’s interest rate decision by the Bank of England’s Monetary Policy Committee, Phil Smith, Managing Director of Business West, said:
“The government’s decision to raise the base rate to 5% will increase pressure on businesses during an already challenging time, as tightness in the labour market prevails and trade barriers with the EU are driving up costs.
“While the increase indicates the Bank’s efforts to tackle inflation, a higher interest rate seems unlikely to address wage or input prices which have been surging since the start of 2021.
“The increase will inevitably impact businesses as consumers with debts will not have as much discretionary income to spend and those companies reliant on overdrafts or variable rate loans will be hit with higher interest costs, impacting their bottom line.
“There are some green shoots in that input producer price inflation has decreased by 1.5% since April, however the Bank must commit to cutting interest rates quickly as inflation slows.
“High inflation and high interest rates could really push some businesses to the brink and solutions must be found that do not depend on the interest rate lever.”
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