The Bank of England has raised interest rates for the fourteenth successive time, lifting its official rate to 5.25%.
The quarter percentage point increase is smaller than some economists had expected, following the release of lower-than-anticipated inflation data last month.
The Bank also cut its forecasts for economic growth but said the UK would continue to avoid a recession.
It brings interest rates to another 15-year high, as they last hit this level in February 2008. Rates have surged in the past year and a half, having been at 0.1 per cent as recently as December 2021.
Michael Kill CEO NTIA says:
“Given the inflationary position announced several weeks ago, we are disappointed that the BOE have once again increased interest rates.”
“With interest rates raised for the 14th time in succession to 5.25% up by 0.25% with many predicting further rises in August and early next year.”
“Our industry can play a big part in supporting the Government in bringing down inflation if we are given the platform to trade. The Government needs to tackle some of the short term barriers to investment and growth, getting a handle on energy, food and drink costs, tackling sector workforce shortages and removing limitations to trade through deregulation.”
UKHospitality Chief Executive Kate Nicholls said:
“Hospitality businesses are particularly exposed to further rate rises, due mainly to the Covid loans many were forced to take out during the pandemic.
“Yet another rise in interest rates only exacerbates the financial challenges many are grappling with, alongside high energy costs, food and drink inflation and labour shortages.
“The inflationary pressures we’re facing as a nation are supply, not demand, led so we need to see urgent government action to bring down these business costs. A good starting point would be to rapidly implement the recommendations made by Ofgem last week to mitigate the energy crisis.
“We would also urge flexibility on loan repayments, including extension to terms, options to move to interest-only payments or delay altogether, and flexible arrangements from HMRC for tax payments.”
No more costs’
This interest rate rise is a “double whammy” for the sector which saw increases from Tuesday 1st August on beer duty, which is now reached the highest level it has ever been.
From Tuesday this week brewers will pay 10.1% more tax on bottles and cans of beer, meaning tax will make up around 30% of the cost of a 500ml bottle.
At the same time, duty paid on draught beer in pubs will be frozen but the tax increase on packaged beer is set to have an impact on both breweries and pubs, adding an extra £225million of costs per year across the industry, at a time when businesses and consumers have already been battling high inflation for months on end.
Emma McClarkin, Chief Executive of the British Beer and Pub Association said:
“Our duty system was long-overdue reform, to better incentivise the production of lower-strength products and nudge consumers towards them. “
“But brewers don’t just supply draught products, they package beer in bottles and cans for enjoyment in pubs and at home as well, so the 10.1% duty increase will have a huge impact, and overall will likely lead to costs going up across the whole category.”
“This will be on top of the enormous price hikes they’ve faced on energy, barley, wheat and other key commodities across their supply chains over the past two years.
The cost of consumer goods have risen on average by 24% in that period, but brewers have worked hard to keep the impact of disrupted supply chains and cost increases to customers at a minimum, with average cost of beer increasing by just half that, at 12% because the last thing they want to do is price people out of enjoying their favourite drinks.”
“We need the Government to guarantee there will be no further increases to duty in the coming months, because there is only so long our brewers and the pubs they supply, can continue to shield customers from these rising costs so that a pint at the local remains affordable for everyone.”
CEO of RIFT Tax Refunds, Bradley Post, commented:
“The Bank of England’s ‘aggressive’ approach to managing inflation via interest rates has, to date, been pretty abysmal. It’s fair to say that they haven’t acted swiftly enough, or with the required level of intent to actually curb inflation, which remains extremely high.
At the same time, fifteen consecutive base rate hikes have had a serious impact on the average household, who are now not only dealing with a sustained increase in the cost of living, but are also paying the price when borrowing to make ends meet.”