This week, last-ditch appeals have been issued by businesses for the Bank of England urging it not to increase interest rates. Businesses claimed that a combination of higher borrowing costs and weak growth would bend struggling retailers into insolvency.
This weekend, Mark Carney faced pressure from business lobbies to maintain rates at historically low levels to promote company investment and consumer spending. On Thursday, the Bank is widely expected to increase rates for the first time in a decade.
The British Chambers of Commerce warned that a rate increase could be the “tipping point” that collapsing business confidence and investment.
“It is pretty extraordinary, given that economic conditions are slowing, that we are talking about interest rate rises,” stated a BCC economist, Suren Thiru.
An economist at the IoD, Tej Parikh, asked Carney to wait until progress in the Brexit negotiations was made. He said: “There is not enough clarity regarding the path for economic growth yet. A lot of things need to be fleshed out in terms of Brexit negotiations.”
Parikh said that firms would have to deal with extra pressure from a rate increase as their customers were already having a difficult time and would be stretched by increasing borrowing costs. A study from R3, a restructuring specialists, earlier in 2017 revealed that 79,000 companies believed that they would not be able to repay their debts after a small increase in rates.