Positive reaction to rate cut by UK small businesses

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Positive reaction to rate cut by UK small businesses

The Federation of Small Businesses (FSB) has issued a positive response to the news that the Bank of England's Monetary Policy Committee (MPC) has decided to further reduce the UK's base rate of interest this month.

Already at an historic low, the MPC today (August 4th) confirmed a 0.25 percentage point reduction in the base rate to 0.25 per cent. In addition, the MPC committed to a further £60 billion purchase scheme for government bonds (bringing the total stock of asset purchases to £435 billion) and the launch of a new Term Funding Scheme to reinforce the base rate cut.

FSB national chairman Mike Cherry argued that the decision will be highly beneficial to many of the nation's smaller businesses, coming at a time when confidence among this group has fallen to a four-year low.

"This is the first time interest rates have been cut for seven years and brings rates to a new historic low," the FSB chief noted.

"Lower rates should lead to cheaper borrowing costs, making finance more affordable and helping to support business investment. Small firms will also welcome the boost to household spending power and consumer demand."

Mr Cherry went on to add that it is "encouraging to to see the Bank of England taking decisive action to boost the economy".

However, he claimed many businesses continue to face serious concerns regarding the long-term outlook for the UK economy following the result of the EU referendum and the uncertainty that this has caused must be addressed in the near future to help in the restoration of business confidence.

The FSB cited the very real possibility of a continued weakening of the pound against other major currencies as an issue that will need to arrested to provide a welcome lift to UK exporters, while medium-term forecasts of a slowdown in economic growth are also a worry for many.

As a result, the impact of this cut to a new historic low base rate must be closely monitored by both the government and the Bank of England, with these institutions encouraged to ensure they are doing everything within their power to stabilise the situation and boost economic confidence and growth in the months and years ahead.