Bank of England's interest rates negatively impacts 33% UK firms: BCC

The survey highlighted that small and mid-sized enterprises (39 per cent), manufacturers (36 per cent), and business-to-consumer firms (37 per cent) are particularly feeling the adverse effects.

Conversely, a small fraction of the firms, just one in 10 (9 per cent), reported positive impacts stemming from the current interest rates, primarily due to higher earnings from surplus funds. However, the predominant sentiment among businesses is one of concern, as the increased costs for new and existing finance are either hampering investment opportunities or constraining cash flow. Businesses also noted a decrease in consumer spending, reduced housing demand, and escalated costs for COVID recovery loans as significant issues, BCC said in a press release.

Interestingly, the level of negative impact has seen a decline from 46 per cent in July 2023, indicating a shift in business sentiment over the months. Additionally, when asked about their preferred interest rate, businesses suggested a median average of 4 per cent, providing insight into the business community's perspective on what they believe would be a more sustainable rate for economic stability and growth.

Alex Veitch, director of policy at the BCC, said: “With all eyes on the Bank of England’s latest interest rate decision next week, our data is a timely reminder about the pain many businesses are suffering at the current level of 5.25 per cent. Firms tell us every day that they are struggling to pay off debts, some dating from the pandemic, and finding it difficult to take out new loans.?Business investment is fundamental to the economic growth everybody wants, but firms will only be able to invest when their financial burdens ease.

“Expectation continues to mount that a cut in the interest rate is on the horizon, and this is likely reflected in the lower negative impact cited by businesses now compared to July last year. But with firms indicating that a rate of 4 per cent would be acceptable, it suggests there is some way to go before the squeeze on companies’ borrowing costs is relieved.”

Fibre2Fashion News Desk (KD)