SME relief at inflation fall

While relieved to learn that interest rates have gone down from 3.2% in March to 2.3%, SMEs are still dealing with the aftermath of spiralling prices since inflation hit a peak in October 2022.

Now, the UK’s smaller sized businesses are hopeful that the next base rate decision in June will see lower figures once again.

Tina McKenzie, Policy Chair, Federation of Small Business (FSB), explained, “Getting back within touching distance of the Bank of England’s 2% target has been a difficult road for many small businesses, who will overwhelmingly feel relief that inflation has fallen precipitously in recent months.

“However, they’re still feeling battered and bruised by the impact that spiralling prices have had on them since inflation hit a peak in October 2022, and are still having to adjust to prices that are significantly higher than they were a couple of years ago.

“A cut in interest rates is starting to feel overdue, and all eyes will now turn to the next base rate decision in June. Yesterday, the IMF recommended that the Bank of England should cut the base rate by up to three times this year and that the base rate should be taken to around 3.5% by the end of 2025, from its current level of 5.25%.”

Tina added, “Core inflation’s decline has not been as rapid, however, and it rose by 3.9% in the year to April 2024, down from 4.2% in March. This may make the Bank of England less inclined to cut the base rate at the next meeting, which would be a missed opportunity.

“Small firms’ confidence levels started to rise over the first quarter of this year, according to our research, and we want to see this valuable momentum keep and even pick up pace, rather than stalling or slipping back again.

“The economic growth we all want to see will be powered to a great degree by small firms, so it is vital to get their growth ambitions back on track, not held back by cost pressures and high interest rates.

“The needs of small businesses should be top-of-mind for policymakers and politicians, as it is their trajectory which will shape the future direction of the economy.”

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