With the Bank of England increasing the base rate from 3% to 3.5%, many businesses are concerned about the additional pressure on their margins.
Commenting on the Bank of England’s decision to make the ninth rate rise in a row, FSB National Chair, Martin McTague, said, “Today’s rise in the base rate was widely predicted, but there is also a sense in the air that the decision to go for an increase – with today’s the ninth in a row – may be less of a one-way bet in coming months.
“This time last year, the base rate was just 0.1%. The precipitous climb in borrowing costs in under 12 months has hit small firms hard, eroding their margins at a time when many are struggling with the very cost increases which prompted the Bank of England to increase the rate in the first place.
“Energy costs are by far the biggest driver of the inflation that businesses and consumers are experiencing, and interest rate increases are doing little to rein in energy bills, while making it harder for small firms to keep the lights on.”
Thinking of appointing Dolan Accountancy?
Give us a call on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com.
Email JaimeMartin added, “SMEs are collectively carrying £33 billion extra in debt, much of it index-linked, compared to January 2020, before Covid hit. Every basis point increase means extra pressure for those on floating rates, and a disincentive to apply for finance for firms looking to grow and invest.
“This was supposed to be the recovery period, where the economy got back into gear, with small firms providing the engine of growth. The cost of doing business crisis has knocked that plan off course, and many small businesses are wondering – amid strikes and disruption, near rock-bottom consumer confidence, and continued rises in input costs – how they will stay afloat.
“The Government’s forthcoming announcement on how it will support businesses once the Energy Bill Relief Scheme comes to an end must have a compelling offer for small firms, one in four of whom say they plan to close, downsize or restructure in the absence of a sufficient level of energy support after March.
“Many small businesses are struggling at the moment. They need certainty and support, to help them make the most of the festive season, and enter the new year in a spirit of optimism.
To find out more about contracting please contact Jaime on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com.