The Bank of England's latest interest rate rise is "no surprise" but is a "further headache" for businesses, according to a senior figure at the British Chamber of Commerce (BCC).
The base rate was increased to 3% from 2.25% on Thursday (November 3) - the biggest hike for three decades - as the bank made a bid to tackle soaring inflation in the UK. It is the eighth consecutive time the bank has hiked interest rates and it has warned Britain is facing its longest recession since records began.
David Bharier, head of research at the BCC, said the decision by the central bank was not surprising following the market turmoil caused by September’s mini-Budget.
“The bank has laid down a clear marker that it intends to bring inflation down by placing further pressure on consumer demand," he said.
But Mr Bharier said raising the interest rate was a "very blunt instrument" to control inflation that was largely the result of global factors, including soaring energy costs and supply chain disruption.
“This is further bad news for businesses who find themselves trapped between rising costs of raw materials, energy and borrowing, and weakening consumer demand," he said.
Matt Griffith, director of policy at South West chamber of commerce Business West, which is part of the BCC, added: "The bank has unfortunately found itself in a position of not wanting inflation expectations to become embedded in the UK economy and facing strong pressure from international markets to raise borrowing costs. This is not a great place to be.”
According to recent BCC research, business confidence has been falling over recent months, driven by runaway inflation. The organisation is now calling on the government to set out a long-term plan to stabilise the economy.
“But even as evidence of a recession mounts, cost pressures on businesses may yet continue as the energy price cap expires next April," added Mr Bharier. “With the chancellor and prime minister both signalling the Autumn Statement is likely to result in spending cuts and tax rises, businesses will be extremely worried about what the future holds.
The Autumn Statement will be delivered to Parliament by Jeremy Hunt on November 17.
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