Bibby Financial Services reacts to latest interest rate decision

The Bank of England announced an increase in the UK base interest rate from 3.75% to 4% today, marking its first rate rise in over three years. The decision comes amid renewed inflationary pressures, driven in part by rising energy costs and raises fresh concerns about borrowing costs and business investment. With UK SMEs already navigating a challenging economic environment, Bibby Financial Services has commented on what the decision could mean for businesses and exporters.

Theo Chatha, Chief Financial Officer for Bibby Financial Services, commented: 

“Today’s interest rate rise is another blow for SMEs already feeling the squeeze, particularly after a disappointing Budget. Over half (52%) of SMEs told us lower interest rates would make them more confident to invest, yet today we’ve seen the opposite happen. This rate rise will increase borrowing costs, put investment plans at risk, and leave the UK’s small businesses with even shallower pockets.

“For exporters, the pressure is even greater. SMEs trading internationally often wait months to be paid by overseas buyers, so higher rates make bridging that gap more expensive. Our International Trade Report found that two-thirds (67%) of SME exporters already say that international trading conditions have increased pressure on their cashflow over the past year, and 29% are struggling with currency volatility.

“SMEs haven’t lost their ambition to grow, and there are practical steps they can take to keep that growth on track. Protecting cashflow is critical – business leaders should assess their funding mix, and if they trade overseas, treat FX management as essential rather than optional. Those who act now to put the right strategies in place will be in the best position to keep their growth on track.”