Member Article

Interest rates down to 1%

The Bank of England cut UK interest rates by a further 0.5% on Thursday to 1%. It is the fifth month in succession that rates have been cut as the Bank’s Monetary Policy Committee looks to help stimulate the economy.

The move was met with a mixed response by North East business leaders and economists.

Martyn Pellew, vice president of the North East Chamber of Commerce (NECC), said: “We welcome all positive moves being taken by the MPC and the Government to try to stem further economic damage being caused by the global problems of the credit crunch and reduced business confidence.

“However there is now little room for manoeuvre left on interest rates. These measures therefore need to be backed up by further support for all businesses, such as abolishing empty property rates, cancelling the proposed rise in fuel duty, and taking further steps to shore up confidence in the financial markets so that businesses can obtain necessary credit.”

Sarah Green, Regional Director, CBI North East said: “This drop in rates should support business confidence and, when added to recent cuts of the past couple of months and the fall in the pound, provides a very significant stimulus to the ailing economy.

“But at these very low levels of interest rates, and with the credit mechanism still impaired, it is vital that the Bank swiftly supplements today’s move with direct intervention in the corporate lending markets.

“The real problem is not the price of credit, but its availability.”

‘Disappointing’

Colin Stratton, FSB Regional Chairman for the North East, said: “The rate cut is disappointing given the figures we presented to the Bank of England which suggests that recent cuts are not having the desired effect.

“Small businesses are clearly worried that monetary policy is being used extensively yet they are still struggling to access cheaper finance despite schemes like the Enterprise Finance Guarantee Scheme that has been rolled out by the Government.

“The concern for small businesses is that there is less and less room for manoeuvre in the economy. The onus is and has always been on the banks to start promoting these lower rates and to make credit available to fire up the economy. Moreover if the banks fail to adhere to viable requests from small businesses, the Government must impose clear guidelines, which force the banks to be fairer to small businesses helping free up crucial capital for small businesses in the North East.”

The drop means rates have reached a new record low since the central bank was created in 1694.

This was posted in Bdaily's Members' News section by Ruth Mitchell .