A stalling of interest rates will do little to mitigate what is an increasingly challenging period for SMEs across Britain. 

September ended a period of steep increases in the interest rate, however today’s decision to pause the rate 5.25%, which was widely anticipated, will continue a period of significant economic challenges and uncertainties for small and mid-sized businesses. 

It comes as the Bank of England issued the stark warning that the economy will be flatlined until early 2025 – with it being ‘far too early to think about interest rate cuts’. 

Michael McGowan, Managing Director, Foreign Exchange, Bibby Financial Services described September’s decision to freeze the hike as ‘the first pause in a brutally long run of rate rises’.

He added: “Yet a rate of 5.25 per cent is no walk in the park for businesses – and SMEs, who rely most on external finance, will be feeling the pinch hardest. What’s more, for the 53% of UK SMEs that import and/or export across borders, the rate pause has already sent the pound tumbling against the dollar and the euro, which represents a potential blow to profitability.  

“It’s critical then that SMEs – the backbone of the UK economy – closely monitor their foreign currency needs while fluctuations persist, to mitigate the risks of a weaker pound and current volatility.”

Nonetheless, according to Alastair Douglas, CEO of TotallyMoney itis unlikely that ultra low rates will return at any point in the near future. 

He said: “The Financial Conduct Authority has ordered banks to put their customers’ needs first, and this means you could move to reduced monthly payments, or extend the term of your deal.

“Remember that this won’t negatively impact your credit rating. However, missed payments can — and they could stay on your credit file for up to six years. If these persist, you might end up in mortgage arrears, leading to court action and even repossession.” 

UK Chancellor Jeremy Hunt sought to offer a more positive outlook on the state of the economy, however, as he stated: “Inflation is falling, wages are rising and the economy is growing.

“The UK has been more resilient than many expected, but the best way to deliver prosperity is through sustained growth”. 

Jason Ferrando, CEO of easyMoney also shone something of a positive light on his outlook for the economy as he revealed his belief that the Bank of England is ‘starting to get a handle on inflation but a freeze on rates was to be expected given that we’re not yet out of the woods’.

He did however add: “For the nation’s borrowers, this will do little to ease the financial pressure they are facing with the base rate remaining at its highest in over 15 years. 

“The silver lining is that for those looking to accumulate a savings pot for future endeavours, returns are favourable, although how favourable depends on where and how you choose to invest your money.”