BoE provides respite for SMEs by holding bank rate at 0.75%

The Bank of England (BoE)’s Monetary Policy Committee (MPC) has voted to hold the Bank Rate at 0.75 per cent.

The proportion of successful SMEs being offered a borrowing rate of 5 per cent or more has hit a record-high of 74 per cent, the Federation of Small Businesses (FSB)’s Small Business Index (SBI) shows. 

Whilst 76 per cent of applicants seek traditional bank loans and overdraft facilities, an increased number are now applying for asset-based, invoice or trade finance.

FSB National Chairman Mike Cherry comments: “With borrowing costs up and Brexit day looming, the last thing small firms needed this week was an interest rate rise. The MPC’s decision to hold the Bank Rate will provide some welcome respite for small firms.  

“We’re seeing the impact of political uncertainty writ large in slowing activity across the construction, manufacturing and service sectors. Higher debt costs would have added to the pain. Low rates are a nice to have but the number one priority remains avoiding a chaotic no deal exit from the EU on 29 March. 

“Once we reach April, small business owners will not only have Brexit to think about, but also higher wage costs, rising auto-enrolment contributions and further business rates hikes. With that in mind, it’s good to see the BoE taking a wait-and-see approach.   

“Too many small firms are still unwilling or unable to access the finance they need to reach their full potential. It’s encouraging to see more businesses branching out beyond traditional debt products, but we still have a lot of work to do to raise awareness of all the options.

“Open Banking is key here. Regulators need to ensure compliance with the initiative, and government should be doing more to raise awareness of its potential – helping to nudge businesses and consumers towards embracing it.” 

Andy Soloman, CEO of research specialist Yomdel, adds: “No news is certainly good news in this respect and the right choice considering the current economic landscape. Inflation remains at a moderate level and to increase money costs for both UK business and the nation’s consumers just weeks away from a potentially hard Brexit, would be foolish, to say the least.

“We’ve already seen shop prices rise this year as the retail sector continues to struggle amidst an air of wavering consumer sentiment.

“This diminished level of consumer activity is also hitting a lethargic property market that has yet to get out of second gear following the festive lull, with the rate of price growth slowing as a result.

“Hopefully, this freeze in rates will encourage some degree of consumer confidence to return as the cost of borrowing remains at a very palatable rate. Although realistically, this is unlikely to materialise until late March at the earliest.”

Whilst the economic environment and business conditions remain turbulent for UK SMEs, due to the size and nature of their businesses, they have the advantage of being able to be flexible and quick to respond to changing market conditions. The key is to partner with the right specialist adviser who will guide you on your strategy and assist in making those all-important business decisions that will have the greatest impact on future success.

For more information about how we can assist you and your SME business, contact Steve Govey or your usual Beavis Morgan Partner.

With demand for alternative finance likely to continue to increase as we head into 2019, what is essential is that SME’s choose a specialist adviser who can recommend the right financial products for their specific business needs.
Our partner business, BM Structured Finance, specialises in sourcing and restructuring debt finance for SME businesses. We match the most suitable products to each individual circumstance and work together to ensure compatibility and satisfaction, thereby enhancing the business’ cash flow liquidity and facilitating maximum growth.
Whether you are a startup or a well-established business, cash is king and managing its flow is crucial to your long-term success. For more information about how BM Structured Finance can help you and your business, contact Simon Belton or your usual Beavis Morgan Partner.