Home Brexit FSB welcomes BoE decision over rates

FSB welcomes BoE decision over rates

by LLB Reporter
7th Feb 19 2:34 pm

The Bank of England (BoE)’s Monetary Policy Committee (MPC) has voted to hold the Bank Rate at 0.75%.

The proportion of successful small business credit applicants being offered a borrowing rate of 5% or more has hit a record-high (74%) according to the Federation of Small Businesses (FSB)’s Small Business Index (SBI)

Generally, the proportion of small firms applying for external finance remains stubbornly low at around one in eight (13%).

Though the majority of applicants (76%) seek traditional bank loan and overdraft facilities, more than a quarter (28%) are now applying for asset-based, invoice or trade finance. The share applying for peer-to-peer finance has now hit over 10%, up from only 6% in Q4 2016.    

FSB National chairman Mike Cherry said, “With borrowing costs up and Brexit day looming, the last thing small firms needed this week was an interest rate rise.

“The MPC’s decision to hold the Bank Rate will provide some welcome respite for small firms.

“We’re seeing the impact of political uncertainty writ large in slowing activity across the construction, manufacturing and service sectors. Higher debt costs would have added to the pain.

“Low rates are a nice to have but the number one priority remains avoiding a chaotic no deal exit from the EU on 29 March.

“Once we reach April, small business owners will not only have Brexit to think about, but also higher wage costs, rising auto-enrolment contributions and further business rates hikes. With that in mind, it’s good to see the BoE taking a wait-and-see approach.

“Too many small firms are still unwilling or unable to access the finance they need to reach their full potential. It’s encouraging to see more businesses branching out beyond traditional debt products, but we still have a lot of work to do to raise awareness of all the options.

“Open Banking is key here. Regulators need to ensure compliance with the initiative, and government should be doing more to raise awareness of its potential – helping to nudge businesses and consumers towards embracing it.”

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