Interest Rates Likely To Increase, Putting Pressure on Finances

24th April 2018.

The Bank of England is likely to raise interest rates twice this year and twice in 2019, despite a sluggish economy, says a forecasting body.

The conversation has gone back and forth, with falling inflation painting a brighter economic picture, while lingering Brexit uncertainty tightens its grip on morale. Bank of England governor, Mark Carney, has now announced the rise to be “likely” this year but does urge that any increase will be gradual. This will not be good news for the business community, who will see even more miserly behaviour from consumers, and will find their own route to expansion paved with unaffordable borrowing fees.

Interest rates could rise as early as May, with many economists expecting such a decision to be made by the Bank’s Monetary Policy Committee (MPC) at the meeting next month. BofE governor Mark Carney has slyly suggested such an early development is unlikely but has insisted that a rise will happen sometime this year. The positive trajectory of inflation has made the interest rate rise less urgent, with the economy slowly improving and savers feeling a slightly softer pinch.

Whether interest rates rise next month or not, there is little doubt that an increase will be felt in the foreseeable future. As a result, business owners should take the necessary precautions, ensuring they are prepared for a downward spiral in consumer behaviour as well as their own. At the Credit Protection Association, our collections team chase unpaid invoices and free up our members’ cash flow. The extra cash has given our members the financial freedom to explore new expansion opportunities and boost revenue.

Mr Archer said the UK economy was “chugging along at a fairly steady but uninspiring rate”, with inflation continuing to fall and a tight jobs market expected to “deliver some uptick in pay growth”.

At the same time, separate research by Deloitte showed an improvement in UK consumer confidence, but said this had “yet to translate into an overall increase in spending”.

Deloitte’s latest quarterly Consumer Tracker survey said UK consumers were feeling “more upbeat” about their personal finances.

However, people were still prioritising essential spending over luxuries, with the retail and casual dining sectors facing “unprecedented challenges”.

The Bank of England’s “will they, won’t they” saga will finally reach its conclusion next month. While the Bank’s governor has now squirmed away from raising the rates in May, a singular rate rise in the year is still imaginable. Whether the rates rise in May, April, June or at the end of the year, businesses should prepare for the fallout.

Business owners will have to turn to alternate platforms for finance, with higher lending fees now marring traditional banking. The ‘retail apocalypse’ already felt by high street vendors will be further aggravated by this extra strain on consumers’ pockets, and business owners will have to work harder to encourage interest. At the Credit Protection Association, our debt recovery services free up cash flow and allow our members to afford new technology, equipment, or even competent web designers to draw attention to the brand.

Economic downturns and anxiety over Brexit will continue to hold the economy back. However, by paying close attention to business finances, cash flow, and approaching third-party credit managers like CPA; business owners can ensure Britain picks itself up.