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FPB urges SMEs to prepare for higher interest rates

Published On 8 June 2007 at 12:21:42

A group which represents the interests of small and medium-sized enterprises (SMEs) in the UK has advised its members to take advantage of the Monetary Policy Committee's decision not to increase interest rates, and look for good fixed-rate loans.

While the Forum of Private Businesses (FPB) correctly predicted that interest rates would not increase again in June, it said that many businesses still think rates will rise again sometime this year.

It added that this was causing uncertainty among SMEs planning investment.

"The obvious problem with further rate rises is that uncertainty discourages investment, particularly for the expansion of smaller businesses who may have worries about the increased cost of borrowing," explained Frank Peck, the economic advisor to the FPB.

"It is much more difficult for smaller firms to absorb short term variations in these costs."

To help SMEs cope with future interest changes, but still expand their operations, the FPB advised that companies should look around for competitive fixed-rate loans.

A survey carried out by Barclays Stockbrokers after the Bank of England decided not to increase interest rates in June showed that 87 per cent of investors still expect rates to increase again this year.

Nearly half (45 per cent) thought that interest rates would exceed six per cent by the year's end.

 

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