With the largest increase in UK interest rates for 27 years and warnings from the Bank of England that recession is looming, the payment industry urged the government to embrace real-time payments in a bid to ease the financial burden felt by businesses.
It comes as both Rishi Sunak and Liz Truss pitch themselves as being the leader that is best to support UK businesses, with Truss’ plans for a reform of business rates backed by the federation of small businesses. Meanwhile, Sunak has underlined his focus on enabling inflation to fall in order to support UK businesses.
Alistair Baxter, Head of Receivables Finance, Taulia, stated on the Bank of England interest rate decision: “By announcing the highest rate rise in 27 years to tackle 40-year high inflation, the Bank of England has shown its teeth and an unwavering desire to control inflation: even in the face of a looming recession. With other major economies moving rates in similar increments, today’s increase of 0.5% comes as no surprise.
“However, with many in the market facing skyrocketing energy and input prices, significantly higher borrowing costs and flatlining sales, it really is going to be a testing period for businesses. Working capital remains that untapped source of funds that will facilitate survival and hasten growth, once we come out of this period of economic uncertainty.”
Nonetheless, the role of the payment industry can’t be understated as firms rely on fast and efficient transactions in order to maximise their growth and mitigate the impact of the tough economic climate.
Craig Ramsey, Head of Real-Time Payments, ACI Worldwide emphasised to Payment Expert the role real-time payments can play as the climate intensifies.
He stated: “Economic leaders and the UK government are battling to find a solution to combat a growing number of economic challenges. While another rise in interest rates adds fuel to the fire, real-time payments can address some of the challenges created by an increasingly challenging economic environment.
“Findings reveal that UK firms could save £1.3bn annually by 2026 by using real-time payments. This would help add £2.6bn to the UK’s economy, equivalent to 0.11% of GDP, by 2026. How do real-time payments provide this boost? Real-time payments improve liquidity in the financial system and therefore act as a catalyst for economic growth.
“This is especially important in our fast-paced and increasingly digital-led gig economies. Offering businesses cheaper, faster and more efficient ways to pay creates an economic multiplier effect. The resulting net savings for consumers and businesses helps drive GDP growth and leads to job creation. “The UK is missing a trick. We are outpaced by emerging nations in real-time payment modernisation, including India and Brazil. The UK government must tap into the potential of real-time payments to help alleviate today’s economic pressures. The benefits of real-time can be maximised by structuring regulatory frameworks that are not only fit-for-purpose today, but also have the flexibility and adaptability to react to developments in the future.”