Pressure Of Interest Rates On Business Revealed

The main negative effect cited by businesses was increased costs for new and current finance, which is either restricting investment or limiting cashflow. Firms also referenced a tightening in consumer spending, reduced demand for housing, and higher costs for Covid recovery loans.

But the scale of the negative impact has fallen from 46%, when businesses were last asked the question in July 2023.

Firms were also asked what they would set the interest rate at, if they were in charge, and 4% was the median average response.

Alex Veitch, Director of Policy at the BCC, said:

“With all eyes on the Bank of England’s latest interest rate decision next week, our data is a timely reminder about the pain many businesses are suffering at the current level of 5.25%.

“Firms tell us every day that they are struggling to pay off debts, some dating from the pandemic, and finding it difficult to take out new loans.

“Business investment is fundamental to the economic growth everybody wants, but firms will only be able to invest when their financial burdens ease.

“Expectation continues to mount that a cut in the interest rate is on the horizon, and this is likely reflected in the lower negative impact cited by businesses now compared to July last year.

“But with firms indicating that a rate of 4% would be acceptable, it suggests there is some way to go before the squeeze on companies’ borrowing costs is relieved.”