Opinion

Long may rock-bottom interest rates continue

2 min read

03 November 2014

Former editor

In the wake of the Bank of England announcing that interest rates would remain at a record low, it's of no surprise that business leaders are calling for more of the same.

Only five per cent of British financial directors (FDs) believe that low interest rates are not benefitting businesses, a survey compiled by RealFD finds.

When quizzed on whether the current record low interest rates currently in place benefit the UK economy or not, an overwhelming 95 per cent believe it is a positive thing for the country.

The interest rate now sits at 0.5 per cent, a figure which has been in place since 2009 when a combination of rising unemployment, retrenched bank funding and fall in business confidence united to drive rates down in the aftermath of the 2008 financial crisis.

Now, RealFD has questioned FDs on whether they think the situation in present day is helping the UK economy and the businesses operating within it. On a company front, only 15 per cent believe that interest rates are not helping their own firm.

The difference now compared with previous years when the UK was dipping in and out of recession is that positive unemployment levels and growing consumer spending are leading many to believe the 0.5 per cent figure cannot remain indefinitely.

However, speaking recently, Bank of England executive Jon Cuncliffe warned that any decisions on increasing interest rates should be carefully thought through. 

“The softening in the pay and inflation data, together with the weaker external environment, for me implies that we can afford to maintain the current degree of monetary stimulus for a longer period than previously thought,” he said.

Low interest rates make repayment of debts more possible, but investment in business operations hard as banks continue to levy strong demands. RealFD finds that British FDs are currently happy with the impact interest rates are having on business and the wider economy – the question remains for how long.

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