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Business organisations welcome interest rates freeze

Business organisations have welcomed the Bank of England’s decision to freeze interest rates after 14 consecutive months of rises.

In a surprise announcement, the Bank said yesterday (Thursday) that it was pegging interest rates at 5.25 per cent.

The decision followed an unexpected fall in the rate of inflation.

The British Chambers of Commerce welcomed the news, but called for “clear direction from decision makers, creating a roadmap for business that really boosts confidence and investment.”

Director general Shevaun Haviland said: “Constant hikes in the cost-of-borrowing have had a hugely detrimental impact on the firms we represent.

“Research published earlier this week by the BCC Insight’s Unit found that 46 per cent of companies said the current interest rate is having a negative impact, while only nine per cent are seeing benefits.

“Companies need reassurance that decisions on interest rates are not knee-jerk reactions to the most recent inflation data.

“We need clear direction from decision makers, creating a roadmap for business that really boosts confidence and investment.”

And the Federation of Small Businesses called for a “permanent plateau” in interest rates.

National chairman Martin McTague said: “Small firms will be profoundly grateful to hear that the relentless upward march of the base rate has finally paused. Now the hope is that the peak has been reached and passed, and that – in due course – rates begin to fall.

“It’s been a long slog to get to this point, and many small firms have suffered financially along the way, with margins and cash reserves battered by both the phenomenon the Bank tried to control, inflation, and the ‘cure’ it applied in the form of fourteen consecutive rises in the base rate, leading to higher borrowing costs and dampened consumer demand.

“Yesterday’s inflation figures showed a welcome fall in core inflation, although prices at the pump are ringing alarm bells. The higher cost of filling a tank could lower consumer spending, with people put off from visiting their local high street, booking a weekend trip, or going for a meal out. A jump in freight and transport costs could also add yet more pressure to margins for businesses in all sectors.

“Last week’s unexpectedly large drop in GDP is a sign that the painful interest rate rises we have endured are acting as predicted, and we urge the Bank to allow time for the lag between rate hikes and the full effect on spending to be fully observed, so that there is less risk of overshooting and causing unnecessary economic damage.

“Small firms need some respite, and now will look to the Autumn Statement for signs from the Government that it’s listening and understands their concerns. As a nation, we urgently need action to stem late payments, which are used by large corporates to offset interest rate rises by demanding, in practice, free credit from their supply chains.

“We’re also calling for an overhaul of business rates and an extension for the 75% discount for SMEs in retail, hospitality, and leisure, due to expire in April, as it is these consumer-facing sectors which have been especially acutely affected by falling confidence levels and economic headwinds.”

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