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15th December 2023

Tough year ahead as interest rate stays high

The Bank of England announced that the interest rate would remain at 5.25% in its latest announcement.

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

“Businesses in Wales will receive today’s announcement by the Bank of England that interest rates remain at 5.25% with mixed feelings. On the one hand, businesses will be pleased that rates have not risen. On the other, interest rates remain at their highest level for 15 years and risk stalling plans for growth.

“While we understand and recognise the steps that the Bank of England with interest rates to help reduce inflation to 2%, prolonged high interest rates are feeding into a low-to-no growth economic cycle which is concerning for businesses.

“54% of Welsh businesses cited interest rates as more of a concern to them now than three months ago in our Quarterly Economic Survey for Q3. Until interest rates are able to decrease, businesses would welcome reassurance from policymakers that there are clear strategies for growth and investment to avoid further economic stagnation.”

Reacting to the latest Bank of England interest rate decision, David Bharier, Head of Research at the British Chambers of Commerce, said:  

“While a cut in the interest rate could have provided some relief for firms ahead of Christmas, today’s decision to hold it at 5.25% was expected and allays fears of further rises.

“UK businesses have been faced with the twin shock of an inflation crisis and increased borrowing costs. Around half of the businesses we survey report a direct negative impact from the current interest rate, while only around one in ten see a benefit.

“The BCC’s latest Economic Forecast expects only a 0.25% point cut in the interest rate for the whole of 2024, although businesses need to be prepared for any unexpected changes given the uncertain policy landscape.

“SMEs have been operating in an uncertain climate for too long, with policies constantly chopping and changing over the past few years. They need to see clear direction from decision makers, creating a roadmap for business that boosts confidence and investment.”

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