Interest rate cut provides short-term relief – Chamber

Business leaders in Greater Birmingham welcomed the Bank of England’s decision to cut interest rates to 4 per cent – but warned it may only bring short-term relief for businesses.

The Bank of England (BoE) has cut interest rates for the fifth time in a year, as the UK economy grapples with high inflation and a stagnant jobs market.

The monetary policy committee (MPC) voted by a majority of 5–4 to reduce the Bank Rate by 0.25 percentage points, to 4 per cent, rather than maintaining it at 4.25 per cent.

An unprecedented split saw governor Andrew Bailey force the MPC to vote twice after a deadlocked initial vote.

It was the first time in MPC history that the committee had to hold two rate votes.

Greater Birmingham Chambers of Commerce said that while firms will welcome the MPC’s decision, rate cuts are only part of the solution to reduce the cost burden on businesses.

Head of policy Emily Stubbs (pictured) said: “Many will be relieved by the Bank of England’s decision to cut interest rates to 4 per cent, reducing the cost of borrowing to levels last seen in March 2023.

“However, this decision was one of the closest made since the bank became independent 25 years ago.

“Food price inflation was singled out by the monetary policy committee as a particular concern, driven by climate change impacting crops, material rises in employment costs, and new charges for recycling packaging.

“And this easing of cost pressures may well be short lived. As tepid economic growth fails to cover government spending, and ongoing global disruptions compound unpredictability, the mounting likelihood of tax rises in the autumn budget will have businesses nervous.

“The government's Small Business Plan, published last week, reflects the right intentions - to bolster and more effectively signpost firms to existing support, whilst easing cashflow and improving access to finance.

“But the government needs to put its money where its mouth is, committing the necessary funding to bring this Small Business Plan to fruition, whilst reducing the cost burdens firms are facing.

“This must include producing a plan for easing tax burdens, rather than raising them in the autumn budget, improvements to ease trade frictions, and greater investment in AI and infrastructure.”