Interest rate rise sparks fresh fears of business closures
By David Wood | 3rd February 2023
The rise in interest rates could push businesses closer to closing for good, one local hospitality industry leader fears.
The Bank of England yesterday raised its base rate of interest from 3.5% to 4% - the highest in 14 years - in an effort to combat inflation.
A higher interest rate will be welcomed by savers, but have a knock-on effect for those with mortgages, credit card debt and bank loans.
It could also mean bad news for businesses who are facing up to the increased cost of borrowing and consumers having less money in their pockets to spend.
Lindsey Holland, owner of The Cleeve Hill Hotel, chair of TURF Cheltenham collective of independent hospitality venues, and hospitality and events executive of Cheltenham Chamber of Commerce, said: "Interest rates rising again, whilst understandable, isn't going to ease the situation within the hospitality industry.
"For independent business owners, each increase takes them closer to closing for good and with guests also feeling the pinch, it means the disposable income for those coming to use them is shrinking further again.
"With the support on utilities due to end in March, we could be looking locally at a significant loss of small businesses.
"With the industry in general still recovering from the debts incurred through Covid, and the majority of independent businesses not breaking even in November and December, the pressure will keep increasing.
"It's definitely a time for the industry to be reaching out to those that can afford to support their local venues and ask them to eat and drink locally. There will be a very appreciative owner welcoming you!"
On the housing front, James Quinn, managing director of Gloucester-based GB Home Surveys, said: "With the Bank of England raising its base rate to the highest level seen since the 2008 financial crisis, there is going to be an understandable level of concern amongst the UK public - and particularly around the impact it will have on mortgage rates and the UK property market.
"However, it's important to note that - so far this year - fixed mortgage rates have actually remained quite steady, with many providers actually offering products in the mid 4% region, being a considerable drop from the 6% high induced by the market response to Liz Truss' disastrous mini budget.
"In fact, as the property market continues to face challenges around supply and demand, it is likely that rates could come down even further as lenders compete for buyers - particularly those with strong loan-to-value.
"As such, and despite the negativity that may besiege this latest rate rise announcement, we at GB Home Surveys believe it is unlikely that the UK property market will see a significant drop in house prices this year, with some regions of the UK actually showing increases in property value.
"Furthermore, given economists are now predicting a lower peak in the BOE rate at 4.5% come mid-2023, it could be argued that the latter part of the year will prove more positive, increasing confidence in homeowners, while driving a small uplift in the market."
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