Budget & interest rate cut: impacts?

Budget day started early with a 7am interest rate cut. Will the measures reach SMEs?

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We all had to start early with our Budget coverage on AccountingWEB this morning - first thing I heard after waking up was the Bank of England's interest rate cut and other measures to stimulate lending to high street banks.

This was obviously part of a choreographed coronavirus strategy agreed with departing BoE governor Mark Carney by Chancellor Rishi Sunak and Boris Johnson at a three-way summit meeting last week.

We will no doubt be hearing about more tax payment holidays and SME emergency funds later in the day. A lot of it is political theatre to reassure us that something is being done to combat the virus threat and its impact on the economy, but it would be interesting to hear your experiences about how effective measures like these are for small businesses. Will a 0.5% drop in lending rates offer much comfort to those hospitality businesses staring a 1 April cashflow crisis in the face?

And as for high street banks, even when times were better they hardly covered themselves in glory when it came to lending to small businesses. Or am I just being cynical?

Your views are always welcome and will be useful as we start to digest the actual announcements buried in the Budget paperwork this afternoon. In the meantime, we're hosting our traditional live Budget blog from noon onwards. Do come and join us to swap quips and observations before and during the Chancellor's speech. 

Replies (3)

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By Justin Bryant
11th Mar 2020 10:58

I am in a good mood today as my mortgage is variable with the BoE Base Rate.

Also, the British public like nothing better than to gear up on the tax-free equity in their home and spend the cash on whatever, so it's bound to have a +ve impact on consumer spending etc.

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Replying to Justin Bryant:
paddle steamer
11th Mar 2020 11:15

I see rate cut as far more symbolic than effective, few financing decisions hang on 0.5% interest given virtually all are stress tested on the upside anyway, getting banks to lend in part is a function of perceived ability to service but is also bank confidence in underlying security for the lending and if that is predicated on future trading I doubt interest rate cuts make a difference- loan guarantees in my experience are more likely to sway the stony hear of a banker.

We are already discussing what we may need to do to support our commercial tenants and how deep a hole the business is possibly facing; apparently one tenant was enquiring yesterday about rates relief and what can the landlords do to help re their rent, we expect such enquiries to increase.

From a stress test point of view we think we might suffer up to a 15% income reduction but this is only guesswork/previous experience in 2008 rather than reality.

Not sure on your consumer spending viewpoint, if one is facing economic/job uncertainty there is quite a tendency for people to save, some of it may run through into consumer spending but I suspect more will be saved/accumulated.

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Replying to DJKL:
By Justin Bryant
11th Mar 2020 13:35

Well it's hardly gonna have a -ve impact is it?

Just watching it now and the taps have been well & truly turned on (as predicted)!

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