UK interest rates have been cut to 4.25% from 4.5% and the governor of the Bank England has indicated more could follow in the coming months.
Andrew Bailey said he would not “give predictions as to when and how much”, but said he was “still of the view that the path, gradually and carefully, is downwards”.
The reduction in rates on Thursday is the fourth cut within the past year and the Bank considered an even bigger cut to 4% due to concerns the global trade war could hit UK economic growth.
Federation of Small Businesses (FSB) National Chair Martin McTague said:
“The cut in the base rate is good news, but against a backdrop of low small business confidence, we cannot pretend the road ahead is rosy.
“For this cut to have a meaningful impact, lenders must pass the savings onto their customers. Small businesses currently face significant barriers to accessing affordable finance, with many applications being rejected or only offered at high rates. Without lenders passing on base rate cuts in full, this opportunity for growth could slip away.
“Personal guarantees are also holding back small firms’ willingness to invest, by turning what should be business loans into a personal financial product, but without the protections afforded to consumer lending. The Government must act now to regulate personal guarantees and ensure that they are only used by lenders in a proportionate way.
“Small firms could drive growth if given the right conditions – but now they are battling a combination of low confidence, late payments, and tax compliance costs. All these sap cash flow, and cash is the lifeline small businesses cannot afford to lose.
“The looming Employment Rights Bill risks tipping many over the edge by allowing unfair dismissal claims from day one and adding the cost of Statutory Sick Pay from the start of employment.
“The Spending Review must deliver a Statutory Sick Pay rebate, and the upcoming Small Business Strategy must finally tackle late payments.”
UKHospitality said the cut will provide some relief for businesses paying back Covid loans and urged the Bank of England to meet market expectations of further rate cuts this year.
Kate Nicholls, Chief Executive of UKHospitality, said:
“This cut to interest rates is positive for hospitality businesses.
“Many venues are still paying back Covid loans and have been suffering under high interest rates, as well as continuing to grapple with the £3.4 billion in additional annual cost that was placed upon them last month.
“Driving economic growth is rightly the Government’s focus and it’s clear that the markets are anticipating further cuts to interest rates this year. It’s important the Bank of England meets those expectations.
“This will be absolutely vital for hospitality businesses to fulfil their ability to support our communities, create local jobs and drive socially productive growth.”