Interest rate cut is respite for West Midlands businesses - Chamber of Commerce
An organisation representing Black Country businesses says cuts to interest rates are a "ray of light" for the region's under fire firms.
However the Black Country Chamber of Commerce warned that businesses should remain cautious amid ongoing geopolitical instability as well as a potential tariff on UK imports to America which could be introduced by the incoming administration.
In an announcement last week, the Bank of England confirmed a widely anticipated move to cut interest rates to 4.75% from 5%.
Bank governor Andrew Bailey said rates were likely to "continue to fall gradually from here”, but cautioned they could not be cut "too quickly or by too much”.
“This is a ray of light for businesses, meaning lower borrowing costs, and we hope this leads to a rise in confidence for businesses to go ahead with their investment plans, given that borrowing costs are a big barrier to firms investing," said Gemma Edwards, Black Country Chamber of Commerce Policy & Impact Officer.
"However businesses should retain a note of caution given the possible impact of a Trump tariff policy coming into force in the next twelve months, as well as the impact of changes from the Government to employment rights, and the ongoing geopolitical instability.”
The move comes after inflation rates fell below the Government's 2% target in September, but they were expected to rise again following a hike in energy prices last month.
A predicted rise in inflation means interest rates could fall at a more gradual rate as the Government assesses the impact of last month's Autumn statement.
“As businesses continue to digest the difficult implications of last week’s Budget, a further interest rate cut is some good news for firms," added David Bharier, Head of Research at the British Chambers of Commerce.
“The cost of borrowing remains a major barrier to investment. Our research shows less than a quarter of companies boosted investment in Q3. The economy will continue to struggle until this changes.
“The continued easing of inflation is likely to translate into further gradual rate cuts. However, there could be some bumps on the way. Services inflation remains stubborn, and major global conflicts continue to bring uncertainty. A decisive Trump presidential victory has powered US stocks to all-time highs, but a policy of tariffs could be inflationary.
“We’re expecting to see a number of long-term plans from the UK Government early next year covering infrastructure, investment and trade. It’s critical that these plans are outlined and delivered at pace, to give business the opportunity to help drive growth.”