Interest rate cut helpful for businesses looking to borrow but tough trading conditions persist

East Midlands Chamber has said the Bank of England’s interest rate cut to 3.75% will benefit firms planning to borrow but factors like a slowing economy and the passed Employment Rights Bill – which received Royal Assent today and became law – mean challenging trading conditions remain.

East Midlands Chamber Director of Policy and Insight Richard Blackmore said: “Firms looking to borrow will welcome this quarter per cent interest rate cut in what feels like an early Christmas present at the end of a tough year, helping them to invest to grow but the conditions wrapped around the edges are less encouraging.

“With GDP having fallen 0.1% amid a slowing economy, a cut in the interest rate was not really a surprise.  Some comfort can be taken from a slight easing of inflation published this week but unemployment is on the rise, now at 5.7% among over 16s in the East Midlands. That level is too high and underlines the challenges firms face, both in finding skilled candidates and finding the funds to cover staffing costs in the first place. At the same time the passed Employment Rights Bill, now in law, will bring a number of challenges for businesses to address with additional paperwork and associated costs. 

“As we look ahead to 2026, on the positive side forecasts suggest we may see further easing of inflation – the factor East Midlands businesses cited as their greatest concern in our Quarterly Economic Surveys across 2025. The second greatest concern has been corporate taxation and while the Autumn Budget was generally less harmful to business than 2024’s, we’re seeing finer detail emerge that will squeeze firms more.

“On the day of the Budget, the Chamber’s Framework for Growth launched, outlining specific asks like improved infrastructure, digital connectivity, sustainability, clean energy, business rates reform and skills investment. Political leaders must prioritise these areas we’ve highlighted, following close engagement with our members, to unlock growth in the East Midlands.”