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With the Bank of England raising interest rates by 0.5 points to 5% – the highest level in 15 years, SMEs are concerned about how this will affect their growth.

Commenting on this news, National Chair, Martin McTague, said, “The Bank of England (BoE) is risking economic slowdown across our small business community, with a jarring 0.5% increase in interest rates. We are standing at a crossroads. Inflation and interest rates are unrelenting.

“An increase in interest rates comes as no surprise – it’s a tried-and-trusted lever to pull in such times – but the size of the increase will hurt, and rate rises are not a magic wand in reducing inflation. This was driven by the highest core CPI rate in 30 years, but it has significant repercussions for everyone, not least for the 1.5million on variable mortgages.

“While higher interest rates are a tool to control inflation, the weight of escalating costs means consumers have less disposable income to circulate in the economy. When the money in their pockets is worth less, the upshot is reduced sales for businesses.

“It’s like adding another heavy load to an already full plate. Banks have a responsibility to show understanding and patience, especially to those who took variable-rate Coronavirus Business Interruption Loans (CBILS) and are now faced with higher costs. Instead of treating loans as just another expense, we need to think of them as a lifeline to keep small businesses trading during these challenging times.”

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Martin added, “High street retailers, start-ups, local bakeries, and tech innovators alike are all feeling the pinch. As the weight on the small business and self-employed community grows heavier, we must strike a delicate balance. Our entrepreneurs need room to breathe, room to innovate and crucially room to grow.

“To help consumers and businesses, the Government could raise the VAT threshold from £85,000 to £100,000. This move could cushion some of the hardest blows of inflation, preventing tax increases from exacerbating the impact of price hikes on businesses and in turn, their customers.

“Meanwhile, energy suppliers should allow firms to ‘blend and extend’ their contracts so they can take advantage of lower wholesale prices. Late payments should also be a top priority, as unpaid invoices can stifle growth and stability.

“Our latest Small Business Index (SBI) survey reveals a stark snapshot of our current economy. We are seeing a divide, where 40% of firms encountered a dip in sales in the first quarter of 2023, while a third managed to increase them.

“This is a testament to the resilience and determination of our small business community – 46% of them said they were optimistic for the upcoming quarter.

“However, rising interest rates are not just numbers on a page, they are lived realities that influence consumer behaviour. The BoE should proceed with caution, mindful of these broad-ranging effects.”

To find out more about contracting please contact Jaime on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com.

Why Thousands of Contractors Choose Dolan Accountancy

With over 25 years experience in contractor accountancy helping thousands of contractors, freelancers and the self employed, Dolan Accountancy has the specialist skills, reputation and credibility you can trust.

Working closely with our sister company, Contractor Umbrella, it means we can offer one low cost, fixed fee package at £125 + VAT. This gives you the flexibility of using both our Limited Company Accountancy Services and our award winning Umbrella Service, for one inclusive cost.

If you’d like to find out more about how Dolan Accountancy can help you and your business, please give us a call on 01442 795 100 or email sophie.lewis@dolanaccountancy.com or jaime.thorpe@dolanaccountancy.com.

We don’t believe in tiered packages or hidden extra fees, instead we aim to give you everything you need, including:

  • Free Company Formation – This is where it all begins. Once you have decided on an available name, we will form your company free of charge (if using our accountancy services) and it will be ready for you to use in as little as three hours
  • Free use of Contractor Umbrella – With IR35 Legislation changes we understand that sometimes you are required to contract via an umbrella company. We will keep your limited company ticking over, while you work margin free via our sister company, Contractor Umbrella
  • A Dedicated Accountant – Your accountant will be there for any company or personal tax advice that you require. We will never outsource work, even to internal teams
  • Free Access to FreeAgent – We offer all of our clients access to FreeAgent, free of charge
  • Free Business Banking – We have decided to waive our commission so our clients can use Tide free of charge for the first year
  • Unlimited IR35 Status Reviews – We will review all of your contracts for IR35 purposes and provide you with our professional opinion as to its status
  • Free Registered and Director’s Service Office Address – Sometimes you just don’t want your home address on display at Companies House. When you sign up to our accountancy services, we will offer the use of our address as an alternative
  • Your Business and Personal Taxation Needs – This includes Company Accounts, Director’s Personal Tax Return, VAT Returns, Payroll, Corporation Tax and Dividend advice, to name just a few
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