Commenting on today’s interest rate rise by the Bank of England, Paul Slevin, Executive Chair of Chambers Wales South East, South West and Mid, said:
“The decision to raise interest rates to 3% is not surprising considering the volatility of the markets following the mini-budget.
“82.5% of Welsh businesses have told us that inflation is the external factor that is of most concern to them and, with this move, the Bank of England clearly intends to bring inflation down by placing pressure on consumer demand.
“However, raising interest rates to control inflation that is largely due to global factors may lead to further issues for businesses. Already balancing rising energy and raw material costs, supply chain disruption and weakened consumer demand, 66% of businesses in Wales expect to increase the prices of their goods and services over the next quarter.
“With the Bank of England indicating that the UK economy is set for a prolonged recession, businesses will rightly be concerned, and it is vital that the Government sets out long-term plans to reassure businesses and provide economic stability.”
David Bharier, Head of Research at the British Chambers of Commerce (BCC), said:
“The decision to raise the base rate to 3% comes as no surprise following the market turmoil caused by September’s mini-budget.
“The Bank has laid down a clear marker that it intends to bring inflation down by placing further pressure on consumer demand.
“But raising the interest rate is a very blunt instrument to control inflation that is largely the result of global factors, including soaring energy costs and supply chain disruption.
“This is further bad news for businesses who find themselves trapped between rising costs of raw materials, energy and borrowing, and weakening consumer demand.
“The Bank is now clearly indicating the UK economy is set for a prolonged recession. Our own research shows that business confidence has been falling at an alarming rate over recent months, driven by runaway inflation.
“But even as evidence of a recession mounts, cost pressures on businesses may yet continue as the energy price cap expires next April.
“With the Chancellor and Prime Minister both signalling that the Autumn Statement is likely to result in spending cuts and tax rises, businesses will be extremely worried about what the future holds.
“It is crucial that the Government sets out a long-term plan that stabilises the economy and focuses on growth.”