Responding to the latest Bank of England interest rate decision, David Bharier, Head of Research at the British Chambers of Commerce said:
“Holding the interest rate at 3.75% was the sensible call given the current geopolitical situation. The MPC is right to emphasise that monetary policy can not address the root cause of this shock – rising global energy prices. However, the Bank signals that future rate rises are possible if the conflict persists.
“The Bank of England is navigating a fundamentally different landscape to the economic shock in 2022. Back then, raising rates was a blunt but available tool. Today, with growth weakening and unemployment rising, the same lever risks causing greater damage.
The Bank’s forecast, which takes into account our own data, points to growth of just 0.7% this year, underlining the current economic fragility.
“Our research shows labour costs have been the top cost pressure for businesses since the October 2024 Budget, cited by three-quarters of firms. At the same time, AI adoption among SMEs is accelerating as firms look for competitive advantage.
“Rate rises increase borrowing costs and suppress investment and demand; this could amplify job losses and further weaken growth.
“Businesses cannot afford policy drift. Targeted support on energy and other business costs will provide initial relief, but lasting resilience requires a step-change in investment, productivity and export growth. The government must use next month’s King’s Speech to set that direction.”