Businesses should be hit with a rise in interest rates next year

posted by 4 years ago in News

That’s according to leading think tank The National Institute of Social and Economic Research (NIESR). They’re warning that, unless interest rates are increased by the Bank of England as early as February 2016, there is a risk that inflation could overshoot the 2 per cent target in 2019. They expect policymakers to lift rates from a record low of 0.5 per cent affecting millions of businesses across the country.

NIESR said the Bank of England will then gradually increase them by 0.5 per cent a year, reaching 2 per cent by the end of 2018. Their analysis flagged up that falling unemployment and higher wages would push inflation above 2pc in the coming years if Bank policymakers did not act in good time.

If the rates were to rise then it’d be for the first time in six years so what would this mean for small and medium sized businesses? Commercial mortgage rates would be affected as well as loans and overdrafts. Sales may fall as a result of customers with debts having less income to spend because of their higher interest to lenders and firms with overdrafts would inevitably have higher costs. Businesses that make luxury goods may well be likely to be the worst hit because of customers cutting back on non-essentials.

Head of Businesscomparison.com, Philip Brennan, says companies need to plan ahead to avoid being adversely affected by potential interest rate changes,

“There’s no doubt that a rise in interest rates will affect small and medium sized businesses. In this case the best course of action is to make sure that you have the right financial products and support to sustain your company. At Businesscomparison.com we compare deals on loans and commercial mortgages to encourage a competitive market and help business leaders to access the best deals for them.”