BoE Interest Rate Increase: Small business experts commentary

The decision by the Bank of England’s to hike interest base rates by a further 0.5%, please find commentary from B2B experts on its potential impact on small businesses below:

Atul Bhakta, CEO of One World Express said, “This is a blow for SMEs just as it is for consumers with debt to repay.

“The energy price cap for businesses announced this week was very welcome. But for many smaller businesses, particularly those without large offices, it will not help tackle the financial pressures they are under. By contrast, the spiralling cost of borrowing will come as a painful blow. It will harm ambitious SME that may have looked to borrow to expand globally.

“In the context of a historic record trade deficit, it is clear ‘Brand Britain’ is flagging, and in need of a spark of inspiration. When questions loom over the simple matter of survival, we are evidently less likely to see bold entrepreneurs willing to take the leap into global opportunity markets, undermining wider government efforts to put growth first.

“Of course, business leaders will understand that inflation is a threat that cannot be quashed overnight – some degree of fiscal restraint will always be necessary. But with the Bank of England seemingly prepared to utilise this instrument more frequently, and at larger intervals, some sense of clarity over the roadmap should be paired with no direct support measures from government.

It is only with this joined-up approach that businesses can emerge from the smog of uncertainty and steer their operations away from survival and towards ambition and innovation.”

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Moshin Rashad, co-founder of ZIPZERO said: “Unfortunately, the Bank of England’s latest counteroffensive to Britain’s spiralling inflation will further widen wealth divides across the UK. Those reliant on mortgages, personal loans, credit cards, and other forms of debt will bear the brunt worst. The knock-on effects, however, will be felt by businesses experiencing lower sales and demand as a result of greatly diminished consumer spending power.

“We must remember, these issues are interconnected – businesses will suffer from high inflation and interest rates, just as consumers will. Most worryingly, both businesses and consumers considering lending options may now find the cost of borrowing too high. The saving grace is that out of high-pressure environments, innovation often thrives.

“Businesses must reevaluate where they can apply novel solutions that cut costs while delivering similar returns. They must also recognise that the pathway towards salvation lies in bolstering consumer spending power as well as their own. An area ripe for consideration is digital advertising. Businesses could begin by making a more effective use of the £27 billion spent each year to reach consumers via Big Tech. Redirecting this expenditure towards direct-to-consumer platforms, which empower users to recuperate wealth from their data, represents a mutually beneficial change in marketing strategy for both businesses and consumers struggling at this economically turbulent time.”

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Ion Fratiloiu, Chief Commercial Officer of Channel Capital said: “Whether for their survival or to fuel growth, access to finance will be integral to many SMEs’ plans in the months ahead. But seven consecutive hikes to the base rate will significantly impact the size and terms of loans they could potentially afford. So, what now?

“The Bank of England is backed into a corner; increasing interest rates to try bringing inflation under control is the logical path to pursue. So, rather than hit out at policy, we should instead consider what more can be done by SME lenders to help businesses in the current climate. For me, it’s about making better, faster decisions, and removing unfair criteria that can hold them back.

“It has never been more important to make finance accessible to SMEs, and this requires more innovative products as well as superior risk-assessment and decision-making engines. This will ensure capital is directed towards deserving businesses without unnecessary delays, red tape and opaque processes. If we can make SME loans more equitable through better use of data and technology, we can help combat challenges such as rising inflation and interest rates to help SMEs access finance that will be so crucial to their long-term prospects.”