Interest rates remain at 4.5% – business industry reaction

The Bank of England Monetary Policy Committee (MPC) has voted to hold interest rates at 4.5%.

Commenting on the latest update from the Bank of England, Neil Rudge, Chief Banking Officer for Commercial at Shawbrook, said “The Bank of England has chosen to keep the base rate frozen in the final decision of the tax year, with the recent uptick in inflation giving the MPC reason for pause. For SMEs, the landscape remains an uncertain one with the looming rise in employer NIC contributions set to take effect in a matter of weeks.

“Additionally, our recent research into SMEs fears revealed that 78% are concerned about inflation with 67% saying the same for interest rates. However, despite the hurdles that lie in wait, more than three-quarters of the SMEs remain confident in their business prospects in the next 12 months. Owners and management teams are no strangers to volatility over the past few years, and for those who are looking to prepare their business to take advantage of the opportunities ahead, specialist lenders are on hand to  provide the support and funding they need.”

James Burgess, Head of Commercial at Atradius UK, said “Stagnant interest rates are piling fresh pressure on businesses and consumers, just as they brace for Rachel Reeves’ Spring Statement.

“This latest decision will frustrate many, adding to financial strain and uncertainty ahead of the new financial year. With rising costs and policy changes looming, businesses and households alike will feel the squeeze.

“To stay resilient, businesses must act now – prioritising liquidity, strengthening supply chains, and securing trade credit insurance to safeguard against economic shocks in the months ahead.”

Anna Leach, Chief Economist at the Institute of Directors, said “The MPC voted 8-1 to hold rates today, with Swati Dhingra the lone member voting for a 25bp cut – notably Catherine Mann has switched back to a hold, from having voted for a 50bp cut last month. The Bank highlight the divergence between survey measures of activity and employment intentions which point to weaker momentum than their official counterparts, which are holding up somewhat better than was expected in February. They also note downside risks to growth from trade and geopolitical uncertainty, both of which have risen. Meanwhile inflation has come in a little higher than expected and inflation expectations among businesses and households are up.

“Overall, modest momentum, low confidence and heightened inflationary risks support the MPC’s plan to be “gradual and careful” in bringing down interest rates.”

Suren Thiru, ICAEW Economics Director said “The decision to keep interest rates on hold will be a palpable letdown to those households looking for relief from high mortgage bills and businesses preparing for April’s major jump in business costs, including the national insurance hike.

“While the vote to ‘hold’ was emphatic, there was enough in the meeting minutes to suggest that rate setters remain concerned over the health of the economy, keeping the door wide open for a May interest rate cut.

“With inflation set to rise further and international headwinds growing, the path to materially lower interest rates remains filled with uncertainty. As such, rate setters will probably continue to maintain their slow and steady approach to loosening policy.”