Interest Rate cut to 4% welcome relief for SMEs, says British Chambers of Commerce
Interest Rate cut to 4% welcome relief for SMEs, says British Chambers of Commerce
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The Bank of England’s decision to cut the base interest rate to 4% has been welcomed by UK businesses, with the British Chambers of Commerce (BCC) calling it a much-needed step away from a period of persistently high borrowing costs.
Reacting to the announcement, David Bharier, Head of Research at the BCC, said the rate reduction comes at a crucial time, particularly for small and medium-sized enterprises (SMEs) struggling with sustained financial pressures.
“Businesses will welcome the decision to cut the base rate to 4%, marking a further move away from a prolonged period of elevated borrowing costs,” said Bharier. “With signs that the labour market is beginning to loosen and unemployment edging upwards, the Bank is right to act to mitigate the risk of a deeper downturn.”
While inflation has fallen considerably since its peak, many firms—especially SMEs—are still contending with the aftershocks of the pandemic, global supply disruptions, and domestic policy changes. Bharier pointed to the impact of April’s national insurance rise as a particular concern.
“SMEs in particular have been under sustained pressure from cumulative cost increases and external shocks. The impact of April’s national insurance rise is now tangible, with firms reporting reduced investment and recruitment plans.”
He also cited findings from the BCC’s Q2 business survey, which showed a growing number of firms citing tax burdens as a major concern.
“As today’s report by the Bank highlights, our Q2 survey showed 56% of firms citing tax as bigger concern than earlier in the year. Ongoing global disruptions have compounded the unpredictability.”
However, Bharier warned that interest rate cuts alone will not be enough to reignite growth or business confidence.
“Rate cuts alone are only part of the solution. To restore business confidence, firms will need to see a roadmap to lower their cost burden, further improvements to ease trade friction, and greater investment in AI and infrastructure.”
Secretary of State for Wales Jo Stevens said: “Since July 2024, more than 60,000 mortgage holders in Wales could have benefited from reduced borrowing costs, and they stand to benefit still further from this fifth interest rate cut.
“In the last year in Wales, wages have increased, employment is up, economic inactivity is down and significant inward investment achieved as we deliver the UK Government’s key mission of economic growth.”
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