West Midlands business leaders universally expect the Bank of England to keep interest rates at their record low, but many want to see more money ploughed into the economy.
Representatives from chambers of commerce believe the Monetary Policy Committee (MPC) will keep rates at 0.5 per cent tomorrow after the UK economy showed some signs of improvement.
But they say credit remains hard to come by for companies and some want the Bank to inject the final £25 billion allowed by the Government’s £150 billion quantitative easing programme.
Bridget Blow, president of Birmingham Chamber of Commerce and Industry, said: “We urge the Bank of England to forge ahead to inject the final £25 billion of quantitative easing funds or to consider alternative measures.
“We were surprised by the previous decision not to extend the programme, particularly after Britain’s gross domestic product contracted by 0.8 per cent in the second quarter, rather than the forecasted 0.3 per cent.
“The total amount of cash pumped into the UK economy is now equivalent to almost nine per cent of nominal gross domestic product, yet bank lending remains weak.
“Quantitative easing has had a positive effect on business confidence as the Chamber’s most recent quarterly economic survey proves. We believe that credit conditions would be even worse if the Bank of England had not implemented quantitative easing. Yet the case still remains that the economy is in a vulnerable state.”
Ms Blow said that evidence from businesses in Birmingham and Solihull showed the local economy was not poised for a recovery. Sales and order figures remained historically low and the outlook for the labour market was still subdued.
The MPC opted against an extra cash injection after its June and July meetings.
In a Reuters poll of economists last week all the participants agreed that interest rates would stay at 0.5 per cent, but 31 thought an extra £25 billion would be ploughed in and 32 thought the programme would remain on hold.
Black Country Chamber of Commerce president Peter Mathews said: “With the sharp increase in sterling over the past few months we are likely to see a decline in the competitiveness of UK exports, which have buoyed the economy during this recession, particularly in the Black Country.
“The Bank of England must avoid increasing the burden on businesses whilst the economic recovery is at such a delicate stage.”
However, Mr Mathews does not believe the quantitative easing programme should be extended.
“There are very few signs that quantitative easing has had much effect and public money could be better spent stimulating demand in the economy through persevering with major building and infrastructure projects.”
Louise Bennett, chief executive of Coventry and Warwickshire Chamber of Commerce, said: “It would come as a great shock if rates changed this month and the Bank’s only other tool to combat the recession at the moment is quantitative easing. It will need to make a decision over whether to complete further asset purchases this week.
“But when I talk to many companies they say the interest rate is not having a positive effect on their business because credit is still difficult to come by.”