Last week, the Bank of England raised interest rates to 1.25%, meaning that the rate is now at a 13-year high. Whilst the increase signals the Bank’s intention to tackle inflation, it is likely that the rise will significantly impact smaller firms who are struggling to cope with the spiralling costs of raw materials.
Since the rise in interest rates, the Bank has also predicted that inflation will soar to 11% this autumn and that UK GDP will shrink by 0.3% in quarter three.
Sara Williams, CEO of Staffordshire Chambers of Commerce, said: “The decision to increase interest rates will impact business confidence which is already at an all-time low due to the current economic instability and tight labour market. Smaller firms who are reliant on banking and overdraft facilities, especially those who are buying raw materials in bulk to offset shortages in the materials, will be largely squeezed as the cost of borrowing will increase.”
Businesses across the region and nationwide have reported concerns regarding the impact of inflation and the surge in the cost of doing business which has come at a time when consumer confidence is also low. Firms are now likely to face further cashflow challenges due to mounting financial pressures.
Chambers across the network will continue to urge the Government to act with pace with regards to the cost of doing business to help ease the pressures on businesses in order to rebuild and strengthen the UK’s economy.
Staffordshire Chambers of Commerce is also lobbying government to find ways to bring people back into the UK labour market to support business productivity.
The next Chamber policy Forum will be taking place on Friday 24th June. Members in the financial or professional services sector are invited to attend the Money Matters Forum which will cover UK GDP, the latest UK economic outlook, the Bank of England’s Monetary Policy Report, and the cost of doing business.
If you are interested to attend, please email rhouda.elalfy@staffordshirechambers.co.uk.
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