Interest rates rises pile on pressure for Lancashire’s small businesses
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Federation of Small Businesses National Chair Martin McTague was speaking after the decision by the Bank of England to increase the base rate from 1.25 per cent to 1.75 per cent, which will increase payments on loans and mortgages nationwide.
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Hide AdHe said: “The need to get a grip on inflation is clear, with costs at a record high for 89 per cent of small businesses according to FSB’s latest Small Business Index – driven by fuel, utilities, inputs, labour and tax hikes.
“Moving interest rates is not without consequences: it’s removing steam from the economy at a time of meagre growth. Small businesses already face grave uncertainty as they try to recover from the impact of Covid, while contending with the cost of doing business crisis.
“First, many commercial, personal and professional loans that small businesses and sole traders hold are not protected by fixed rates and will move in line with the increase today. In a situation where inflation is already putting many small firms in extremely difficult conditions, there is now further concern that these businesses will face higher costs in paying back their loans.
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Hide Ad“Second, attempts to get back to a functioning commercial lending market will be hampered as new products will become more expensive – and so small firms will find it harder to access affordable credit.
"The British Business Bank’s Recovery Loan Scheme is coming back later this month, and this could not happen soon enough. If the economy slows in autumn, it will be even more important for the scheme to be operational and in place, so it can be flexed up.
“Hard-working individual business owners are also already fighting an uphill battle with supply chain disruption, increasing utility bills and surging fuel prices. Action must therefore be taken on other challenges that small businesses face.