Following the decision by the Bank of England to hold the base rate at 5.25%, Federation of Small Businesses (FSB) National Chair 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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About FSB
As the UK’s largest business support group, FSB is the voice of the UK’s small businesses and the self-employed. Established over 40 years ago to help its members succeed in business, FSB is a non-profit making and non-party political organisation that’s led by its members, for its members. As the UK’s leading business campaigner, FSB is focused on delivering change which supports smaller businesses to grow and succeed.
FSB offers members a wide range of vital business services, including access to finance, business banking, legal advice and support along with a powerful voice in Government. Each year FSB also runs the UK’s Celebrating Small Business Awards. More information is available at www.fsb.org.uk. You can follow us on twitter @fsb_policy and on Instagram @fsb_uk.