Credit, Collections & Insolvency News
The Bank of England has raised interest rates from 2.25% to 3%.
Responding to the announcement, Federation of Small Businesses (FSB) National Chair Martin McTague said “Whatever the macroeconomic justifications for this latest rise, the eighth in a row, its effects will be felt immediately on the ground by small businesses carrying many kinds of debts, as well as by hard-pressed consumers.”
“Consumer confidence in October was only slightly above its all-time low in September, which spells worrying news for countless small firms relying on consumer spending in the so-called ‘golden quarter’ running up to the festive season.”
“Our research found that firms in the hospitality sector had a confidence reading almost twice as negative as the overall score for all sectors in Q3, raising fears of a wave of closures if prospects do not improve this winter.”
“Prior to today’s base rate hike, small firms were already telling us that the availability of new credit worsened in the third quarter, and that finance was already getting more costly, adding to the financial pressures they face.”
“Inflation is still sky-high, especially for business inputs, where it is running at around twice the rate of that felt by consumers.”
“Today’s rise may be seen by markets as necessary and inevitable, but for small businesses struggling under a debt burden and seeing decreases in custom that will be cold comfort.”
“The Chancellor must not forget small businesses and self-employed people in the upcoming Budget. While there are undoubtedly tough decisions ahead, a further drop in small business numbers, after 2020 and 2021 saw a combined loss of nearly half a million, will hamstring the UK’s economic recovery before it has a chance to get going.
“Action on late payment at least would be a godsend for small firms, opening up flows of working capital to keep them able to trade. The long-running scandal of large corporates’ poor payment practices must end, and the sooner the better.”
Tommaso Aquilante, Associate Director of Economic Research at Dun and Bradstreet said “High energy and food prices, and tight labour markets have led the Bank of England to maintain a hawkish posture, increasing rates by 0.75bps in November, to 3%, after hiking by 0.5bps in September. This is the steepest rate hike in 33 years.”
“While supply-chain pressure, globally and in the UK, starts easing, the fast transmission from energy prices to the rest of the economy erodes households’ purchasing power and hits demand. A recession is highly likely. And although the current monetary policy might prove painful for households and businesses, the pain that an out-of-control inflation would inflict to them and the broader economy would be much higher, which is why the Bank of England is so determined to bring inflation back to the target. Businesses should therefore expect further rate hikes in the near term.”
“Smart and effective use of data can help businesses stay resilient in the current times of economic uncertainty. This means looking across their business at their suppliers, ensuring their supply chains can continue to be viable; that they are monitoring their customers with increased scrutiny, to ensure they are paid on time have a strong cash flow; and identifying new customers and markets or detect changes in demand from existing ones to help ensure a robust sales pipeline.”