The Bank of England (BoE) has raised interest rates by 0.5% to 3.5% in ninth increase in the past year. With this move, mortgage payers will be facing increased borrowing costs. The move comes despite of earlier indications that inflation had peaked in the United Kingdom, which now faces a prolonged recession.
Despite it being the highest increase in the past 14 years, the BoE has told borrowers to prepare for fresh hikes in the new year.
Together with mortgage payers, this measure is expected to impact small businesses throughout the country. On this, Gravita CEO, Caroline Plumb OBE said: “The 0.5% hike in interest rates is another blow to small businesses already struggling with high inflation, huge pressures on their workforce and the imminent rise in corporation tax. It could push many companies already stretched to the limit into insolvency.”
Plumb further added: “With the second anniversary of the first repayments on the COVID loans approaching, many of which are linked to the base rate, this further increase in rates comes at the worst possible time for small firms. By increasing the cost of servicing those loans, the Bank of England is piling the pressure on companies that have taken out record amounts of debt over the past two years. There are tough times ahead. In these incredibly difficult conditions, it is vital for firms to properly understand their cash flow and implement comprehensive financial scenario planning, which will give them the best chance of bouncing back when the economy improves.”
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