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21st March 2024

No change to interest rates

The Bank of England has held interest rates at 5.25%.

Paul Butterworth, CEO at Chambers Wales South East, South West and Mid, said:

“Despite the fall in inflation announced yesterday, the news that the Bank of England has decided to hold interest rates at 5.25% for the fifth time in a row was not unexpected.

“While no immediate change offers some stability with regards to short-term business planning, the high level the rate has been held at is still concerning for businesses in Wales. In our Quarterly Economic Survey for Q4 of 2023, 41% of Welsh businesses stated that interest rates were more of a concern to them than in the previous quarter.

“Yesterday’s inflation data and recent growth, however small, hints that we are heading in the right direction to create an environment where interest rates could fall later this year. In the meantime, the economy remains fragile and businesses will be looking to policymakers for reassurance and clear plans to drive growth.”

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

“Today’s decision to hold interest rates at 5.25% was widely expected. However, it prolongs the period of uncertainty for firms grappling with high borrowing costs.

Our recent survey of more than 1,000 UK businesses found a third of report a direct negative impact of the current rate, while around one-in-ten are positively impacted. This largely comes down to businesses weighed down by borrowing costs versus those with surpluses to invest. Smaller businesses, and those in sectors such as hospitality and retail, are more likely to be in a precarious state.

“While yesterday’s inflation data showed a further easing, most small businesses know that the economy remains fragile. The interest rate is itself a driver of inflation, as housing, rental, and borrowing costs continue to rise.

Our most recent forecast expects some cuts to the base rate going forward, potentially falling to 4.5% by the end of the year. But in the meantime, businesses need reassurance from policymakers that there is a clear plan to drive much needed economic growth.”

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