Bank of England slammed by businesses over rate rise as small firms struggle to survive
THE Bank of England’s rate rise means “the worst of both worlds” for many British firms, an industry group has warned.
Businesses are facing having to grapple with higher borrowing costs while coping with higher prices as well.
The Bank yesterday raised interest rates by 0.25 per cent to 4.5 per cent, returning rates to levels that were last seen in 2008.
Governor Andrew Bailey defended the 12th rate hike in a row, saying: “These things have serious impacts, we’re very sensitive to this.
“If we don’t tackle inflation, it will be worse for people.”
Many small firms — which employ 60 per cent of the country’s workforce — have been struggling with survival in the face of soaring energy, materials, transport and wage costs which has eroded their profits.
But while the BoE has admitted its strategy of raising rates has so far had little impact in bringing down inflation, higher interest rates have added huge extra debt costs for firms.
The BoE warned yesterday inflation would last longer than it originally forecast and admitted it had made the biggest mistake in its forecasting history, as the UK economy was now set to grow rather than face a two-year-long recession.
Business chiefs have warned that the flip-flopping forecasts add to the challenges of investment decisions and the threat of a record-long recession made them more cautious as a result.
David Bharier, of the British Chambers of Commerce, said inflation had been “devastating” for small firms.
He added: “But interest rate rises can also have serious negative effects too, particularly for firms looking to borrow to manage their cashflow problems.
“The combination of high interest rates and high inflation would mean the worst of both worlds for many small firms.”
Just under half of hospitality firms highlighted higher interest rates as a concern, the BCC reported.
Emma McClarkin, CEO of the British Beer and Pub Association, said it was a “toxic mix” for the industry.
She said it “is making it incredibly difficult for pubs to survive”.
Joanne Farrell, landlady of The Windsor Castle in Stockport, Gtr Manchester, said: “When things go up, people cut back on how many pints they buy or they stay in, which will make it even harder for pubs.”
Jay-Z’s £39m loan to Tidal
RAPPER Jay-Z personally loaned the Tidal music streaming service £39million before it was bailed out by his friend, Twitter founder Jack Dorsey, it has emerged.
Jay-Z launched Tidal in 2015 as an “artist-owned” streaming service.
He was joined by Madonna, Deadmau5 and Kanye West, who pledged to launch new material on the rival to Spotify.
But the so-called “future of music” failed to take off.
Court documents show Dorsey agreed to buy Tidal through his Block tech venture after meeting Jay-Z, real name Shawn Carter, at a retreat in the Hamptons, New York.
The documents also show that at the time of Block’s £244million takeover, Tidal was “failing financially, losing its major contracts, and facing an ongoing criminal investigation”.
A US judge dismissed a lawsuit against Block by its shareholders but said the company had made “a terrible business decision”.
Man . . . I feel like a woman
MAN GROUP, the world’s biggest listed hedge fund, is to be run by a woman for the first time in its 240-year history.
The London fund has picked Robyn Grew, 54, as its new CEO to take over from Luke Ellis, who retires in September.
It hired Anne Wade as chairman in February, meaning the two biggest jobs at the firm will be taken by women.
Grew, who first joined Man in 2009, said that the appointment was an “honour”.
ITV 10% ad cash fall
ITV has posted a 10 per cent drop in advertising revenues but said its new streaming service was performing strongly.
ITVX, with hit show Love Island, hosted by Maya Jama, led to a 49 per cent streaming rise in the first three months of 2023.
ITV warned summer ad revenues would slide further, but boss Dame Carolyn McCall said the rest of the industry faced worse dips.
Roll is fired up
THE boss of Rolls-Royce yesterday said his strategy to turn the company around was “moving at pace”.
Tufan Erginbilgic was taken to task by shareholders at the engineering firm’s annual meeting for calling Rolls-Royce a “burning platform” when he first arrived.
Mr Erginbilgic said he had been highlighting the firm had been “underperforming” after the impact of Covid.
The CEO said the company could become “much more competitive” and confirmed it would make underlying profits of up to £1billion.
Voda’s grown
VODAFONE’S biggest investor has a seat on the board just days after saying it wanted influence over the company.
UAE-based telecom firm e& bought a 10 per cent stake a year ago and has gradually increased it.
Now chief exec Hatem Dowidar is moving to Vodafone’s boardroom.
If its stake builds above 20 per cent it can add an extra member, although it has ruled out a full takeover.
Vodafone recently promoted Margherita Della Valle to chief exec as it negotiates a merger with UK mobile firm Three.