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SMEs likely to be hit hardest with interest rate rise - Perthshire Chamber of Commerce

SMEs likely to be hit hardest with interest rate rise

Peter Gallanagh, CEO for Scotland and the North at Azets, the UK’s largest regional advisor to SMEs, said that the SME community will be disproportionately impacted by the increase in interest rates.  “This is the first time in 13 years that the UK base rate has been at 1%. The interest rate rise, whilst still historically low, will place additional repayment burdens on borrowers and in turn impact on SMEs as spending starts to be curtailed.  With more than 300,000 SMEs in Scotland any further interest rate rises will have a significant effect on the economy, employment and tax receipts.

“Inflation, currently at 7%, is at a 30-year high due to an unprecedented confluence of factors. These include the pandemic, global supply chain disruption, Brexit, a lack of skilled workers and materials to meet demand, tax rises, the record number of job vacancies at nearly 1.3m, the energy price cap increasing by nearly £700 for 18 million householders and the worrying international situation”.

The Bank of England is using the rate rise as a tool to tackle inflation and Peter Gallanagh warns that soaring inflation will compound the problem: “Inflation is set to increase well beyond the current rate of 7% with further interest rate rises highly likely.  Additional rate rises will trigger a further tightening of consumer spending and reduced footfall both in person and online.”

Peter Gallanagh urged SME business owners concerned about the multiple financial pressures to seek advice sooner rather than later as early intervention can significantly reduce the risk of trading and cash flow problems.

 

Pictured: Peter Gallanagh

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