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Base rate plateau a concern for small businesses

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In the wake of the Bank of England’s decision to maintain the base rate at 5.25%, the Federation of Small Businesses (FSB) has expressed concern about the impact on small business growth and investment.

FSB National Chair Martin McTague commented on the decision, stating, “Yet again, the MPC has opted to stick instead of twist, a move which was widely predicted but which is no less disappointing for it. The high plateau rates are currently stuck at is now undermining growth, as small firms struggle to access affordable finance to help them expand.”

McTague emphasised that although inflation is now back on target, the lack of a rate cut could hinder the fragile signs of economic recovery. “Holding off a cut in the base rate until a future date risks snuffing out tentative signs of a recovery in GDP, with the flat growth in April a warning sign,” he noted.

Despite the recent higher-than-expected services inflation, McTague warned that the threat to growth must not be overlooked. He feels to do so would “have potentially devastating consequences for small businesses.”

The FSB is hopeful that the Bank of England will soon reach a tipping point for a rate cut, which would provide small firms with the much-needed opportunity to invest and scale up their operations. McTague concluded, “Small firms will be hoping that the tipping point for a cut will be reached sooner rather than later, to help them invest and scale up.”

This sentiment is shared widely among small business owners who are looking for more favourable financial conditions to drive their growth and sustainability. The need for accessible and affordable finance is vital.

If you would like to discuss your business finances in light of these developments, please do not hesitate to contact us.

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