The Chief Executive of the East Midlands Chamber has commented after the Bank of England announced that it will increase interest rates by 0.5% to 1.75% amid a forecast that the UK economy will contract for five consecutive quarters.
Scott Knowles said: “The Bank of England’s bleak forecast signals a struggle ahead for businesses, their employees and customers given the precarious state of the economy, but there is hope of improvement in the medium to long term if they get the support urgently needed.
“Spiralling costs – from energy, fuel, people and raw materials – are cited by firms as by far and away the top concern right now, with 62% of East Midlands companies telling us they expect to be forced into raising their own prices in our latest Quarterly Economic Survey for Q2 2022.
“There are many causes of the current inflation crisis – global supply chain problems, trade barriers, soaring energy costs, increased taxes and labour market shortages – and this combination has caused very real crises in both the cost of living and cost of doing business.
“Interest rate rises alone will do little to address these and there is a risk it will continue to stifle investment among small businesses, which often require loans that are quickly becoming more expensive to service.
“With investment intentions among our region’s firms down – by 6% compared to the previous quarter for plant and machinery, and by 3% for training – the direction of travel by the Bank of England does not appear to offer much hope this will change.
“With the incredibly tight labour market putting upward pressure on inflation and long-term confidence beginning to wane, it’s crucial the Government now works with the private sector to come up with a solution that will enable business to drive the growth that can minimise the impact of the forecast recession.
“This should include reducing the costs for small businesses to invest in upskilling their workforce and providing training-related tax breaks, as well as reforming the shortage occupation list to allow sectors facing urgent demand for skills to get what they need.”