Today, at noon, the Bank of England has announced that they’re cutting interest rates from 4.25% to 4%. In an announcement that had many industry experts teetering between whether or not the Bank of England would raise interest rates, cut them, or steady the ship, the official announcement may surprise many. Now our experts will take a look at what this means for UK business.
What do the interest rate cuts mean for business?
The key thing to know about the Bank of England’s interest rate cuts is that it’s a positive sign for anybody – business or homeowner – looking to borrow. And when it’s easier to borrow, it’s easier for an economy to grow.
When interest rates drop, so does the amount savers make by holding on to their money rather than spending. This encourages people to spend more on goods and services throughout the country.
Add those two things together, and it only spells positive things for businesses:
- easier borrowing + more willing-to-spend customers = better business
How can you capitalise on the cuts for your business?
We can understand why businesses might be holding their breath right now, being less willing to take a risk on growth. Interest rates are still at 4%, and that’s by no means low when you compare it to the Bank of England’s interest rates of pre-2021 when interest rates bounced between the lows of 0.1% to the dizzying heights of 0.75%.
But it’s also worth pointing out that the new interest rate of 4% is a far cry away from the 5.25% seen at the end of July 2024. It’s also following a continued trend of interest rate cuts from the Bank of England, now in its fifth cut since August 2024. That’s a trend that ought to give business leaders increased confidence for taking risks and borrowing to expand their business.
What should your next steps as a business leader be?
Consider if there are areas where you might push your business to grow. Are there new services or product offerings you’ve been considering that you haven’t felt confident enough to try yet? If borrowing is what you’re holding out for, then now could be a good time for you to think about whether the time is right.
Of course, no decision should be made in business without a proper risk-benefits analysis, and you should consider whether this trend will continue, and even lower interest rates might be found in the not-too-distant future. You don’t necessarily need a knee-jerk reaction to capitalise on the lower interest rates.
Regardless, today’s announcement is a positive for business owners, and you ought to take time to review your business strategy and see how growth might now be possible with the updated interest rate figures.
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