Shock interest rate rise

ended 16. December 2021

Following the Bank of England's surprise decision to raise rates amid the Omicron uncertainty, we sought the views of small business owners around the UK.  

14 responses from the Newspage community

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"Though this is a minimal increase, it is a material knock to consumer confidence at exactly the wrong time. If there was a recipe for how to create a perfect storm to hurt our high streets and small businesses, this would be it. Inflation, rising interest rates and Omicron, all on the back of nearly two years of pandemic-induced turbulence. Now more than ever it's important people try to shop locally, as spending local will support local jobs. In the absence of Government support, it's down to us all to support our local businesses and help them to weather the storm."
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"The day after the UK hits a record number of positive Covid cases, the Bank of England decides to increase interest rates. Although inflation is clearly a concern, the timing is bizarre to say the least. The Omicron variant is already dampening demand in the economy, especially for small businesses, and this rate hike could decimate it."
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"This is yet another kick in the teeth for small business owners and consumers alike. Now I have to worry about the home bills as much as the business ones. To top it all off, the Chancellor is in the USA."
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"This nightmare just never seems to end. Yes, we all know the cost of living is rising but why throw a sudden interest rate rise at us just as we are coming to terms with the Omicrom variant? We have limped through the past 18 months to save our businesses, worked our backsides off and now this. Straws and camels back are the first words that spring to mind, along with senseless hypocrisy, a lack of thought and foresight and common sense."
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"Inflation is bad for business so why shouldn't the Bank of England confront it head on? As things become more expensive, people spend less and this affects the economy more than a small interest rate rise. Raising interest rates will stabilise inflation and help the economy. This is something that the Bank of England should have done months ago. With inflation under control, goods are sold at a fair price and the economy runs better. This was the right decision."
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"While the timing came as a surprise to many, a rise in rates to 0.25% was widely expected, especially after the recent inflation figure of 5.1%. The focus will now switch to whether this is 'one and done' or the first in a series of rate hikes throughout 2022."
"With many consumers and businesses already struggling with an increase in costs, raising interest rates will only make this an even more difficult time. It impacts small businesses as costs soar and customers cancel or delay projects until they can afford them. Couple this with another possible lockdown on the horizon and the outlook for many small businesses is bleak. Many will now struggle well into next year."
"Despite the headlines of an interest rate 'hike', I think we need to keep things in perspective. A base rate of 0.25% is still incredibly low. We should aim to move slowly towards more normal rates to protect savers who are seeing their savings ravaged by inflation. A 0.15% increase in rates is only 80p a day in extra interest on the average £193,000 mortgage."
"I'm expecting at least two more base rate increases over the next few months. Inflation is taking hold and the Bank of England must be concerned about it fuelling higher wage demands, further baking inflation into the system. I think property prices could fall quite sharply next year, and that the volume of mortgage transactions will be far lower, which will hurt our business. But much will depend on how Omicron plays out."
"The Bank of England really can't read the room, can they? Prime the market for a rise in November, then don't. Raise the following month when nobody expects it as our economy is rapidly closing thanks to Omicron. You couldn't make it up. The Government and the Bank of England are a headless chicken. Anyone that needs to remortgage should be getting on with it now."
Let's be honest, this has been on the cards with inflation going through the roof and we have been telling anyone who will listen to secure a new fixed rate deal sooner rather than later. In reality, this is a very small increase and will take time to make much of a significant difference to actual mortgage interest rates which have crept up anyway in expectation of a rate rise happening anyway. It does seem that the Omicron variant on the rampage we're just going to have to deal with a slight bit of short term pain until it burns itself out but that the spectre of sky high inflation poses a bigger long term problem to household finances that needs to be got to grips with.
An absolute hammer blow for the beauty & hospitality industries. With the rise of Omicron infections causing many businesses to cancel office parties our cancellation are spiralling and we now face an even greater risk of a cashless Christmas with the interest rates going up.. We have had to take out loans over the past year to cope with the Covid Pandemic with our businesses not being able to open as the majority of us received absolutely no financial assistance and now face having to pay higher repayments per month and the possibility of further restrictions and Lockdowns.. I see lots of people in these industries needing Food bank help because in the beauty industry we are predominantly self employed.. No customers mean no pay..
The news of an increase in interest rates will be hugely concerning for business owners who rely on short-term bank funding and presents another formidable obstacle for them to overcome. What this really amplifies is the importance of cashflow forecasting and building in headroom to cover eventualities like this. As a company that works closely with businesses, we understand the knock-on effect this will have to those firms that need to borrow, the majority of whom will be unable to pass on those additional costs. Some could now suffer from less disposable income and more overheads if they pay more in interest on a bank overdraft or credit card than the loan itself. In the climate we’re currently in, it’s never been so important for a business to partner with a funder who will support them and provide funding options that won’t hold their businesses back. There are options out there, like Invoice Finance for example, which will typically charge lower rates of interest than a bank overdraft. So, with interest rates likely to increase again in the new year, it’s crucial that businesses know the funding options out there and how the costs compare.
Inflation is inevitable staff shortages means we have to pay higher wages. Gas and electric diesel petrol prices on the up. Once the spiral starts it will be hard to stop.