Interest rate rise a bitter pill to swallow for businesses – Chamber

Business leaders in Greater Birmingham have warned that the Bank of England’s first interest rate rise in more than three years will be “a bitter pill to swallow” for businesses already struggling with rising energy bills and persistent cost pressures.

The Bank’s Monetary Policy Committee (MPC) voted 8–1 yesterday (Thursday 5 November) to raise rates from 3.75 per cent to 4 per cent.

It is the first increase since August 2023.

One committee member, Catherine Mann, voted for a larger rise to 4.25 per cent.

Governor Andrew Bailey said the rise “shouldn’t be seen as the first in an inevitable long sequence of hikes”.

He added that unless the conflict in the Middle East is resolved, it is unlikely to be the last increase.

Greater Birmingham Chambers of Commerce’s own surveys suggest that capital investment among Greater Birmingham firms has been falling for almost two years in a row.

Emily Stubbs (pictured), head of policy at the GBCC, said: “Yesterday’s decision will be a bitter pill to swallow for businesses already grappling with rising energy bills and persistent cost pressures.

“The Bank of England faces a difficult balancing act. Inflation remains stubbornly above target, but much of the renewed pressure is being driven by global energy prices rather than an overheating domestic economy.

“Our surveying suggests that capex investment amongst Greater Birmingham firms has been in decline for almost two years straight.

“Higher borrowing costs risk putting yet another brake on business investment at a time when meaningful economic growth relies on firms having the confidence to invest, innovate and grow.

“With Andrew Bailey making clear that further rises are not inevitable, we hope this proves to be a short-lived tightening cycle.

“Businesses need stability and certainty, alongside a relentless focus from government on creating the conditions for investment and stronger economic performance.”

The MPC will announce its next decision on 17 December.

Business leaders can hear more about the region’s economic prospects at the Birmingham Economic Summit.

Leading voices from across the city-region will discuss Greater Birmingham’s economic outlook, the opportunities ahead, and what it will take to unlock greater investment and growth.