The Chief Executive of the East Midlands Chamber has responded to the Bank of England’s announcement that interest rates will rise from 1% to 1.25%.
Scott Knowles said: “Many businesses will have been expecting yet another hike to interest rates to combat spiralling inflationary pressures, but this doesn’t detract from the huge unease they will be feeling about the direction of travel, as the Bank of England appears to be overseeing a prolonged period of aggressive monetary tightening.
“Against a backdrop of continued domestic and global headwinds that are causing a very real cost of doing business crisis – which we can see is now seriously affecting the economy with output falling by 0.3% in April – we should be backing firms to invest in order to make the productivity gains that will drive the growth we desperately need.
“By hiking interest rates, businesses face another barrier to spending as the price of debt accelerates. Our latest Quarterly Economic Survey for Q2 2022 showed that investment intentions in plant and machinery among East Midlands firms fell by 6% compared to the previous quarter.
“At the same time, intentions for investing in training – something of major importance during a time when four in five businesses attempting to recruit are struggling to find the skills they need – dropped by 3%.
“Declining business investment is a serious cause for concern and urgent Government action is needed to halt this fall. Cutting VAT on companies’ energy bills to 5% would ease the squeeze on their cashflow and give some room for manoeuvre.”