Lloyd Powell, Head of ACCA Cymru/Wales responds to today’s interest rates rise announcement
The Bank of England has today raised UK interest rates to 3%, the biggest single interest rate increase in over 30 years – signalling challenging times for mortgage payers and business owners alike.
The Bank of England also warned the country could face its longest recession on record.
We spoke to Lloyd Powell, Head of ACCA Cymru/Wales, who told us:
“Our members are clear that tackling high interest rates and inflation are their top priorities, so today’s news of a further rise to 3% will be alarming for many firms.
“ACCA’s SME Tracker data suggests declining growth and hiring intentions, while 57% report borrowing to manage cashflow is more difficult than a year ago. Undoubtedly this eighth interest rate rise will further exacerbate the challenges for the UK’s SME community.
“Accessing finance is hard and is taking longer to access. It is vital to put finance in place well before it’s needed. SMEs across the UK need stability and as much certainty from the Exchequer as it can provide to allow them to effectively plan, recover and grow.”
Dr Maria Rana, macroeconomic expert from the University of Salford Business School, said the autumn statement would bring more clarity:
“The Governor has justified today’s decision by explaining that inflation might increase even higher than the 40-year high (10.1 %) in September, due to the disruptions in supply chains post pandemic, the war in Ukraine and decrease in the labour force. Bailey has also announced that there is a ”tough road ahead” but the Bank also does not expect interest rates to raise as much as markets expect.
“Let’s now wait for the autumn statement and spending review later this month to see how tough the road ahead will be.”
However, Nicholas Hyett, Investment Analyst, Wealth Club, said despite today’s announcement, the economic outlook was better than a month ago. He explained:
“It helps that the government and bank are now pulling in the right direction. The Bank raises rates to curb inflation, by discouraging people from spending money. Rishi Sunak’s plans to raise taxes and cut public spending have the same effect. The recent stability in sterling reduces the need to hike rates to defend the currency too.
“Recent macroeconomic data suggests previous rate rises are starting to have an effect. House price growth has slowed and perhaps even started to reverse. Consumer lending more broadly is also falling as the general public look to nurse wallets and purses over what is set to be a difficult winter.
“It’s far too early to call time on rate rises, but at least the two giants of British economic policy, the Bank of England and HM Treasury, no longer look like they’re squaring up for a bare knuckle boxing match. A joined up effort should calm market nerves and could help mitigate the long term pain.”
