With two months of stagnant growth the economy seems to be slowing under the new Labour government.
With big pay deals being handed out by Downing Street, you would think the Bank of England would be under more pressure from Number 11 to drop interest rates and try to get the economy going again.
The real concern for businesses lies in the Bank of England’s anticipated decision to keep interest rates at 5%.
While avoiding further rate hikes may provide a sense of short-term stability, the prolonged period of elevated rates continues to present significant challenges, particularly for businesses dependent on borrowing.
Companies that rely on credit to fund growth, manage day-to-day cash flow, or invest in new projects will find these costs becoming increasingly burdensome. The effects are particularly pronounced for small and medium-sized enterprises (SMEs), many of which are more vulnerable to the cost of borrowing due to their tighter margins and limited access to alternative funding sources.
With financing costs remaining high, SMEs could be forced to defer investment in key areas like technology upgrades, workforce expansion, or new market ventures, which would hamper long-term competitiveness and growth potential. Larger firms may also struggle to justify significant capital expenditures in this high-interest rate environment, potentially slowing innovation and reducing their ability to respond to emerging market opportunities.
