No change to interest rate welcomed by UK enterprise

The Bank of England has declared there will be no change to UK interest rates which are to hold at 4.75 per cent, as widely expected by most UK economists.

Small business groups have welcomed the decision claiming enterprise can now look forward to a period of stability, after much uncertainty in the five rate rises since November.

The latest rise in August seems to have already scared some into caution, with BoE data showing house prices and borrowing rates seem to have eased.

The good news for small business and manufacturers is not so appealing for consumers with saving accounts.

Nick Goulding, chief executive at the Forum of Private Business, said it is too early to assess the full impact of the quarter-point rise, but that concerns were mounting over a hike in rates.

"We were concerned that another increase would have an impact on consumer confidence and spending," he said.

"Small businesses want economic stability to enable confident future planning. The FPB fully appreciates it is a difficult balance to strike for the Bank of England.

"The last thing we want is a surge in inflation, but equally we don't want recession. However, on this occasion we are happy that the Bank of England has chosen to steer clear of a move that would further dent consumer confidence."

Meanwhile, Graham Leach, at the Institute of Directors, seems to agree the Bank have thought about the timing of the decision and had to realise the adverse affect a rate rise could have on smaller companies.

"Now is not the time to increase the burden on businesses by a hike in interest rates. We are pleased to see that the Bank of England has decided to hold off another rate rise this month."

In the main, analysts are now divided between those who think the Monetary Policy Committee will raise rates by the year end and others who believe they will be kept on hold.

According to the IoD, the big freeze is not something business can rely upon, with the group predicting rises before 2004 and into 2005.

By next year, they expect interest rates to climb to 5 per cent - the same rate predicted by Barclays Bank by the end of this year.

The British Chambers of Commerce has said the BoE must continue its cautious approach and not impose unnecessary interest charges on the SME sector.

David Frost, BCC Director General, stated: "Rates now appear to be close to their neutral level, and it is essential that unwarranted rises are not imposed on the business sector."

Freelance UK asked the FPB what government red tape was in store for small business for the rest of the year, during a time when rates look set to fluctuate so marginally.
Kieron Hayes, spokesman for the FPB, said: "October 1 will see the introduction of new legislation concerning discrimination in the workplace, alternative dispute resolution and the minimum wage."

All companies are advised to have their policy in place by this date.

He said the FPB would like to see a set of common commencement dates to help small business comply with tax and legislation, but confessed they didn't "hold out much hope of it ever happening."

 

10th September 2004

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