Today (2 February), the Bank of England has raised interest rates to 4%.
The rise is the 10th consecutive rise in interest rates and is at the highest level for 14 years.
In a press conference announcing the rise, the Bank of England forecast that inflation will continue to decrease over the course of the year and that while the UK is still set to enter a recession, it is likely to be shorter and milder than originally expected. The chancellor has welcomed the Bank’s decision and approach to reducing inflation.
In Q4, inflation remained the largest concern for 75% of Welsh businesses but 45% also shared their concerns regarding interest rates.
It is expected that today’s action by the Bank of England will impact businesses and mortgage holders in particular.
In the Chamber’s quarterly economic survey for Q4, 67% of businesses in Wales expected to raise the prices of their goods and services in the next 3 months due to several cost pressures including raw materials, rising utility bills, labour costs and fuel prices.
Responding to the rise in interest rates, Paul Slevin, Executive Chair of Chambers Wales South East, South West and Mid, said: “The 10th consecutive rise in interest rates will impact businesses in Wales who have already had to face three years of economic shocks.
“The latest results from our quarterly economic survey show that while inflation remains the top concern for businesses with 75% citing this in Q4, concern about interest rates is now at 45%.
“Businesses are more financially stretched now than during the pandemic due to less government support and multiple cost pressures like inflation, fuel, energy and raw material costs. Energy costs are a particular concern as the Energy Bill Relief Scheme is replaced by the Energy Bill Discount Scheme from April.
“Further rate rises could risk a deep recession. Businesses need more support than ever to ensure that the recession is short lived and the economy recovers.”