Rate Cut Could Give Firms Welcome Breathing Space

01 Aug 2024

Published in: British Chambers of Commerce News

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Chambers respond to the Bank of England’s decision to cut the interest rate

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David Bharier, Head of Research at the British Chambers of Commerce, said:

“Today's decision by the Bank to cut the interest rate gives many smaller firms welcome breathing space and could trigger an increase in investment as borrowing costs decline.

“This cut, the first since 2020, became inevitable as inflation has settled at around 2% over recent months. Our economic forecast expected this cut, as well as a further reduction by December, bringing the interest rate to 4.75% by the end of the year.

“The Bank will be monitoring events closely as global conflicts and trade tensions could still exert price pressures on commodities and the finely balanced 5-4 voting split shows this caution. For UK SMEs, our research shows that inflation remains a top issue for them, albeit down on the peak of concern in 2022.

“A cautious and well-communicated approach from the Bank will support business confidence, which has been steadily increasing in recent months.

“As the Chancellor begins to prepare her Autumn budget, we want to work in partnership with government to unlock the investment needed to boost economic growth.”

Black Country Chamber Policy & Impact Officer, Gemma Edwards added: 

“The announcement today that the Bank has lowered rates to 5% will come as welcome news to Black Country businesses, who told us in the Q2 Quarterly Economic Survey that inflation remained a topic of concern for them.

"This interest rate lowering signals that the Bank of England believes inflation is under control, though we are conscious of the note of caution sounded alongside this rate decrease. But overall, this welcome signal that interest rates are decreasing could prove beneficial to businesses weighing up whether to take the next investment step.”