Following the Bank of England’s decision to maintain the base rate at 5.25%, the Federation of Small Businesses (FSB) has voiced concerns about the negative effects on small business growth and investment.

FSB National Chair Martin McTague commented on the decision, stating, “Yet again, the MPC has opted to stick instead of twist, a move that was widely predicted but which is no less disappointing for it. The high plateau rates we are currently stuck at are now undermining growth as small firms struggle to access affordable finance to help them expand.”

McTague emphasised that although inflation is now back on target, the lack of a rate cut could hinder the fragile signs of economic recovery. “Holding off a cut in the base rate until a future date risks snuffing out tentative signs of a recovery in GDP, with the flat growth in April a warning sign,” he noted.

Despite the recent higher-than-expected service inflation, McTague warned that the threat to growth must not be overlooked. He feels doing so would “have potentially devastating consequences for small businesses.”

The FSB is hopeful that the Bank of England will soon reach a tipping point for a rate cut, which would provide small firms with the much-needed opportunity to invest and scale up their operations. McTague concluded, “Small firms will be hoping that the tipping point for a cut will be reached sooner rather than later, to help them invest and scale up.”

This sentiment is widely shared among small business owners seeking more favourable financial conditions to drive their growth and sustainability. The need for accessible and affordable finance is vital.

If you would like to discuss your business finances in light of these developments, please do not hesitate to contact us.

For more information, visit: FSB – Base Rate Plateau Risks Stifling Growth