Commenting on the Bank of England’s decision today (11 May) to raise the base rate from 4.25% to 4.5%, East Midlands Chamber chief executive Scott Knowles said: “The Bank of England’s decision to raise interest rates for a 12th consecutive time shows it is still pursuing strong action amid stubbornly high inflation, which was 10.1% in the year to March.
“This approach, however, is not without serious side-effects, and those impacted most by the decision will be mortgage holders and businesses reliant on lending.
“Our research shows that while inflation remains by far and away the biggest concern for East Midlands businesses, with 64% citing this in our latest Quarterly Economic Survey for Q1 2023, concern about interest rates has risen up the agenda in recent months – cited as a concern by 28% of companies.
“Together, these issues have been challenging businesses’ ability to invest and grow for almost two years now.
“Despite slight improvements in business confidence, firms continue to be hit by a raft of cost pressures and continuously hiking interest rates risks future price rises – 52% of our region’s companies expect they will be forced to increase their prices over the next three months – which ultimately exacerbates inflation.
“Raising interest rates alone is a blunt instrument that doesn’t address some of the fundamental causes of inflation, such as failure in the energy market and global supply chain shocks.
“The only way out of this vicious cycle is through taking action to boost economic growth. As we outline in our Business Manifesto for Growth, this means concentrating on the ‘four Is’ of investment, innovation, infrastructure and international trade.”