Following today’s decision by the Bank of England to increase the base rate from 1.75% to 2.25%, Federation of Small Businesses (FSB) has warned that the increase “will cause further pain of many small businesses.”
FSB national Chair Martin McTague said, “With the latest inflation figures showing only a small decrease from recent record highs, this rise in the base rate feels in many ways like it was inevitable.
“However, the further pain it will cause many small businesses and self-employed people cannot be ignored.
“Many small firms which took up funds via CBILS will be on variable rates, but do not have the protection offered by Pay As You Grow, which helps borrowers manage and spread out repayment stress.
“More widely, commercial loans which are pegged to the base rate will rise, eating away at margins which are already under enormous pressure from inflation, sky-high energy bills, and slumping consumer and small business confidence.
“FSB figures show that small businesses’ perception of credit availability and affordability is firmly in negative territory, and decreased between the first and second quarters. The interest rates paid by small firms have also increased, while acceptance rates for new credit applications fell.
“Yesterday’s announcement of support on businesses’ energy bills will help many, but is yet to arrive and may not be enough for thousands of firms who agreed to new or renewed contracts before the 1 April cut-off at a much higher price than they were previously paying, and for those who signed up after that date but who have been facing half a year’s-worth of vastly costlier energy prices.
“The mini Budget tomorrow is a chance for the Chancellor to make a strong statement in support of small businesses and self-employed people, with today’s eye-watering rise a clear illustration of the scale of the challenge.
“Overhauling business rates, reversing the NICs increases, cutting fuel duty, and making sure more small businesses are not caught up in Corporation Tax would all be very welcome measures.
“On the non-fiscal side, action to stem late payments through greater accountability and transparency for big corporates, and a commitment to smart and responsive deregulation would pay huge dividends without costing the public purse.”