Luxury marque in rates cut call
Jaguar Land Rover yesterday led calls for a full one percentage point cut in interest rates this week.
The West Midland luxury carmaker made the call 24 hours after announcing that it was seeking to shed up to 400 more jobs at its three manufacturing plants, bringing the total number of lay-offs to 600.
Chief executive David Smith said a “dramatic” cut in the Bank of England base rate was an “absolutely vital” economic stimulant.
“We need a real shock to the system that a significant rate cut will provide,” he said.
“Stimulating demand is crucial to avoid a deep and long recession, and interest rates are the place to start.”
Mr Smith made the call after welcoming what he called the Government’s “bold and imaginative” actions to reignite the British economy last month.
A further deep cut in interest rates is the next step towards steering the economy away from recession.
He said yesterday: “We have seen bold action from Government. Now is time for the Bank of England to follow suit.
“Only then will the benefits of Government action be felt in the real economy by improving cash flow and consumer confidence.”
Birmingham Chamber of Commerce and Industry was less emphatic yesterday, arguing that even a full one point cut in rates would be unlikely to help small businesses or re-stimulate the property market.
Chamber president Bridget Blow, a former non-executive director of the Bank of England, said the economic downturn would continue while the banks refused to lend to each other.
“There is overwhelming pressure on the Bank of England to announce at least a half a per cent cut in interest rates,” she said.
“But the extent to which a cut will affect businesses, particularly small businesses, remains to be seen.
“For many the real issue is access to borrowing with many banks likely to rein in lending despite the Government’s bail-out package and the associated conditions.
“Our members on the ground in the property sector remain unconvinced that banks will extend rates to customers and potential customers.
“Many possess very little optimism that even a 0.5 per cut will help to stimulate new mortgages and property activity under current conditions, and they will be looking to government to see what other progress can be made to support local firms.”
Black Country Chamber president Peter Mathews said a half-point cut this week “should be the bare minimum”.
He argued: “The Bank of England should have cut interest rates sooner in order to rein in the economic crisis.
“Inflation is not the serious threat to the economy at this present time, so a sizeable cut must be a priority to encourage economic activity and attempt to avoid a long period of recession.”
Coventry and Warwickshire Chamber called on the MPC to make “the biggest cut it can”.
“We want to see a huge fall in rates and I would strongly recommend that the Bank makes the biggest cut it possibly can when it meets this week,” chief executive Louise Bennett said.
“The effects of the downturn on businesses across the UK are clear for all to see and companies in Coventry and Warwickshire need all the help they can get.
“I believe at least a half per cent cut in rates is needed and what is absolutely imperative is that this is then passed on to businesses in terms of a reduction in their borrowing rates when it comes to loans, overdrafts and investments.”