Bibby Financial Services’ chief executive officer (CEO) for the UK, Ted Winterton, has said the Bank of England’s (BoE) decision to raise interest rates will have mixed effects on the SME economy.
While the rise implies a positive outlook on the economy on part of the BoE, it risks putting pressure on micro-business which had become accostumed to the steady decreases that had persisted on since 2007.
Winterton said: “The increase is a mixed blessing for SMEs. On the one hand it signals that the Monetary Policy Committee is more confident about the economy, but the rise in interest on loans could hit some micro businesses who’ve become used to a decade of rock bottom rates.”
He quoted Bibby’s latest Global Business Monitor research, which showed that 56% of business expected the rate rise to affect them, and 39% reckoned the impact would be negative for their business.
Winterton added: “With the Bank of England forecasting two additional rate rises by 2020, businesses are likely to become even more stretched. It is therefore crucial that SMEs review their business plans to account for future rate increases, while also leaving enough room for the funding they need to invest in their business so they can continue to grow.”
After yesterday’s announcement, the BoE said that further rises in the lead-up to Brexit would only come “at a gradual pace and to a limited extent”.