The British Chambers of Commerce branded the Bank of England’s interest rate increase as a “blunt instrument to control inflation” which would be further bad news for business.
The Bank announced today (Thursday) it had increased interest rates to 3%, a rise of 0.75 percentage points making it the biggest single rise in the cost of borrowing since 1989.
The Bank also warned the UK could be on course for the longest recession since reliable records began in the 1920s
David Bharier, Head of Research at the British Chambers of Commerce (BCC), said: “The decision to raise the base rate to 3% comes as no surprise following the market turmoil caused by September’s mini-budget.
“The Bank has laid down a clear marker that it intends to bring inflation down by placing further pressure on consumer demand.
“But raising the interest rate is a very blunt instrument to control inflation that is largely the result of global factors, including soaring energy costs and supply chain disruption.
“This is further bad news for businesses who find themselves trapped between rising costs of raw materials, energy and borrowing, and weakening consumer demand.
“The Bank is now clearly indicating the UK economy is set for a prolonged recession. Our own research shows that business confidence has been falling at an alarming rate over recent months, driven by runaway inflation.
“But even as evidence of a recession mounts, cost pressures on businesses may yet continue as the energy price cap expires next April.
“With the Chancellor and Prime Minister both signalling that the Autumn Statement is likely to result in spending cuts and tax rises, businesses will be extremely worried about what the future holds.
“It is crucial that the Government sets out a long-term plan that stabilises the economy and focuses on growth.”