UK Interest Rates Threaten Future of Small Businesses

There has been no change with UK interest rates this week. The market has moved very little. The Bank of England has remained quiet. Could this be the lull before the storm? The Banks decision to keep interest rates in the UK at an all-time low for more than three years has proved ineffective and the money markets do not offer any optimism for the foreseeable future.

The UK crisis is not being helped by the ripple effect from the Eurozone and with the US went into their third phase of quantitative easing last month there will be no quick fix on the island. But critics can´t help but feel as though the UK crisis is partly the bank´s own making.
Three years ago the Monetary Policy Committee decided to bail out banks in the UK by handing them £80billion with a view to offering consumers cheaper loans and affordable mortgage lending.

 

The policymakers argue that deflation rather than inflation is the answer to the current economic crisis thus have opted to maintain low interest rates at 0.5% and pump the system with £375billion worth of electronic money through quantitative easing – a scheme designed to flush cash into the system and encourage spending.

The funding for lending scheme introduced by the government in July 2012 is also an attempt to improve inflation by encouraging small businesses to take out loans with whilst interest rates are low. Critics argue the UK could be heading for another financial disaster.

The current economic crisis was caused by banks over lending mortgages people couldn´t pay back. House prices rocketed and the bubble burst. The same pattern is being repeated by the banks by encouraging small businesses to lend. When the bubble bursts millions of small businesses will collapse.

Take a look at the figure and any economist will tell you the bank are committing commercial murder. The UK government owe a total of £1trillion to other nations and consumers in the UK are in debt by of further £1.5trillion. Yet the banks are encouraging people to borrow more. That is why, for the time being, interest rates in the UK are so low.

 

Background to this Report

It can be difficult to accurately forecast the movements of the UK property market and to predict forthcoming changes to interest rates – that is why each week we analyze all the latest expert opinion on the state of the UK property market and condense it into a short, easy-to-read UK Property Market Forecast. We also do the same for UK interest rates, and each week produce an Interest Rate Forecast which provides the latest interest rate forecasts and predictions for the UK.

Understanding the factors that are influencing interest rate and property market forecasts can give you an advantage when considering a property purchase. The UK property market is affected by a number of different factors, which combine in sometimes surprising and quite localised ways. Our weekly UK Property Market Forecast takes all of these into consideration and provides a mixture of national and local property market forecasts.

In much the same way, movements to UK interest rates can sometimes be forecast. We provide the latest interest rate forecasts and predictions from leading UK experts, together with comment on what it all means and how factors like inflation and energy prices are influencing interest rate forecasts.