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Further rate rises 'will hurt SMEs'

Published On 4 June 2007 at 17:01:38

Ahead of next week's meeting of the Monetary Policy Committee (MPC), a group representing the interests of small and medium-sized enterprises (SMEs) has urged the Bank not to increase interest rates again.

Since August 2006, the Bank of England's MPC has increase the base rate of interest by one per cent, from 4.5 per cent to 5.5 per cent.

The increases have been considered necessary to try to curb spending and inflation in the UK.

However, David Kern, the British Chamber of Commerce's (BCC) economic adviser, revealed that a further increase could have a negative effect on SMEs in the country.

"We acknowledge that there is a distinct possibility that UK Bank Rate may rise to 5.75 per cent in June. But we urge the MPC to adopt a cautious and gradual approach," he explained.

"We strongly urge the MPC to keep rates on hold next week. Given the acute pressures facing UK businesses, the MPC should allow more time for previous bank rate increases to have their effect on the economy, before tightening further."

"There is a distinct danger that ratcheting up interest rates would worsen unnecessarily the pain facing UK businesses, at a time when inflation is set to fall sharply, and the pace of economic activity is set to slow."

In May, the Office for National Statistics (ONS) revealed the consumer price index inflation fell below three per cent in April, suggesting that previous interest rate increase could be having an impact.

 

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