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The Bank of England ended its run of 14 consecutive interest rate increases in September, halting the base rate at 5.25%.
Ahead of the next rate review on 2 November 2023, Myerson's Banking Team considers its implications for businesses and their operations.
How could the rate freeze affect my business?
The Bank of England base rate influences many other interest rates.
UK banks base their own internal base rate on the Bank of England's, and it is often used as the benchmark for the interest rate margins within facility agreements and other commercial agreements.
Generally, fluctuating interest rates affect businesses in a number of ways:
- Investment – changes to borrowing costs affect cash flow and the ability to invest in long-term growth.
- Confidence - confidence levels of decision-makers are affected, limiting their attitude towards risk and investment decisions.
- Consumer spending – interest rates can limit consumer spending, impacting demand for goods and services.
- Forex - Interest rates affect currency exchange rates as they influence the flow of capital across borders. It affects the ability of businesses that operate and trade internationally to forecast and manage forex risks and pricing.
The interest rate freeze provides a level of stability, and with the potential for rate decreases in the next 12 months, this may present an opportunity for businesses to start considering new debt or refinancing options, along with opportunities for expansion and investment.
