The boss of one of the UK’s biggest Chambers of Commerce says businesses are increasingly worried about the impact interest rate hikes will have on their operations.
The Bank of England has raised interest rates to 1 per cent and warned inflation will top 10 per cent as the economy heads for recession.
Members of the Bank’s nine-strong Monetary Policy Committee voted 6-3 to raise rates from 0.75 per cent to 1 per cent – the fourth time in a row that they have voted for a rise – in a bid to pour water on rising prices.
It is the highest rates have been since 2009 with three members calling for an even bigger increase to 1.25 per cent due to worries over rocketing inflation.
The Bank also predicted that growth will contract in the final three months of 2022 as the cost squeeze sees households rein in their spending.
East Midlands Chamber chief executive Scott Knowles said: “The acceleration of interest rates hikes over the past few months is becoming an increasing concern for businesses, which have until now relied on low repayment fees to make sizeable investments in their people, plant and machinery.
“While the latest rise, framed by the Bank of England as a method of tackling the escalating cost of living, was expected, it further squeezes the margins on firms at a time when they are already dealing with increased overheads for staff, energy and raw materials.
“Against a backdrop of growing domestic and global headwinds including the terrible events in Ukraine, it will be viewed by many as a further step in a prolonged period of aggressive monetary tightening at a time when consumers and businesses are struggling under a myriad of rising cost pressures.
“Our latest Quarterly Economic Survey for Q1 2022 shows two-thirds of East Midlands companies expect they will be forced to raise their prices over the next three months as a result, leading to a very real cost of doing business crisis.
“Cashflow went into negative territory for three out of 10 of our region’s organisations at the beginning of this year and raising interest rates is another deterrent to future investment – which ultimately is what enables businesses to improve productivity in order to create growth, jobs and wealth in their communities.
“The Government simply must do more to ease the burden on small and medium-sized businesses, which are crucial to steering the economic recovery.”
