04 Aug 2023
Commenting on the Bank of England’s latest rise in the interest rate to 5.25%, Vicky Pryce, BCC Economic Advisory Council member, said:
“Businesses across the UK will be fervently hoping that today’s rise in interest rates is the last they will see.
“While many firms will have already factored this increase into their plans, it is clear from the recent rise in insolvencies that the economic environment is becoming stacked against smaller firms. They are the ones with less cash reserves in the bank and greater exposure to finance.
“Yet data from the Office for National Statistics clearly shows that input cost pressures for firms are finally falling. And recent BCC research backs this up with 45% of companies now expecting to increase prices, a 15-percentage point fall compared to six months ago.
“We are also likely to see a further substantial fall in inflation in July as last year’s energy price rises drop out of the data.
“While inflation remains the top concern for businesses overall, interest rates have emerged as the second top concern, with 41% citing this as more of a worry than three months ago in the BCC’s latest survey.
“And there is now a real danger that the economy could be pushed into recession as it takes 18 months for changes in 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.
“At the same time, it is encouraging that the Government has recently expanded the list of shortage occupations to recruit more workers from abroad. Hopefully it will now be considering what more can be done to ease staff pressures.”