The Bank of England reduced the base rate from 5% to 4.75% following a 0.25 percentage-point cut in August, which was the first drop in four years.
Governor Andrew Bailey said rates were likely to “continue to fall gra
dually from here”, but warned they could not be cut “too quickly or by too much”.
The Bank’s quarterly Monetary Policy Report revealed that the Chancellors £70bn package of tax and borrowing measures will place upward pressure on prices, increasing inflation by up to half a percentage point over the next two years.
The Bank found that the national insurance increase and the increase in the national living wage “is likely to increase the overall costs of employment” and will be passed on by employers through a mix of higher prices, marginal costs and wages, but the balance between those is not yet clear.
Kate Nicholls, Chief Executive of UKHospitality, said: “This interest rate cut is positive news in the short-term for hospitality businesses, particularly those still struggling with pandemic debt repayments, and consumer confidence.
“However, the short-term benefit of this cut is significantly overshadowed by the looming £3.4 billion worth of cost increases that will hit the sector in April. Those changes will impact the potential for future interest rate cuts too, with forecasts already revised down following the Budget.
“We need the Government to take action to mitigate these increases. particularly the lowering of the employer NIC threshold. Lowering the threshold to £5,000 suddenly brings in thousands of part-time staff, and that disproportionately hits hospitality.
“Government action to reduce the devastating cost impact in April is essential.”
Michael Kill, Chief Executive of the Night Time Industries Association (NTIA) said:
“While the Bank of England’s rate cut from 5% to 4.75% offers some relief, it does little to ease the mounting economic pressures on the nightlife sector, which are only intensified by the recent autumn Budget. The introduction of new tax increases at this crucial time — right before the ‘golden quarter’ — could not come at a worse moment.”
“As the ‘golden quarter’ is essential for many nightlife businesses to offset quieter months ahead, the additional tax burden forces many to focus on cost-cutting measures and reevaluating reinvestment strategies. Looking ahead to 2025, the combined impact of rising operational costs and declining consumer spending is set to create a perfect storm for the industry.”
“While inflation may be easing, key expenses like wages, energy, and rent remain high, continuing to erode profitability. To make matters worse, the upcoming changes to business rates in April 2025 threaten to add even more financial pressure on an already strained sector.”
“The NTIA calls on the government to fully understand the compounded impact of these policies and to prioritise long-term, targeted support for the nightlife industry, which plays a critical role in both the UK economy and its cultural fabric during these uncertain times.”
