Rates cut 'will restore confidence'

Business leaders in the West Midlands are calling for a cut in interest rates to restore confidence after a turbulent and volatile period on the financial markets.

They also point to the stark fall in the consumer price index - the Bank of England Monetary Policy Committee will give its latest decision tomorrow.

Katie Teasdale, policy adviser at Birmingham Chamber of Commerce and Industry, said: "While economists expect interest rates to be held at 5.75 per cent following the recent global difficulties, there is real concern across the region's business community that this is only a lull in the storm.

"The worry is that the MPC will have increased rates to six per cent by the end of the year - the sixth hike since August 2006. That would be disastrous for the region's businesses.

"Despite the relative resilience to high rates by West Midlands' manufacturers, a situation highlighted in several industry surveys recently, Chamber members are extremely worried about the future impact if rates remain at 5.75 per cent. Manufacturers will need a fall in interest rate levels if the current positive out-look is to be sustained.

"At the same time service sector professionals are being forced to cut back on investment intentions in both equipment and training. We would urge the MPC to lower interest rates as soon as possible to help our businesses flourish at this difficult time."

Sue Yates, president of Solihull Chamber of Commerce, said: "We accept fully that managing inflation is vital but following the fall of CPI inflation to 1.9 per cent in July, surely it is now time for the MPC to finally consider the very serious and potentially negative impact of their decisions on the business community?

"Businesses accept that the MPC needs to carefully balance inflation concerns, but this must be done within the context of the wider economic picture not least the impact upon consumer demand and export levels. There must be a cut in the pipeline."

David Burton, chairman of the 14,000-member Confederation of West Midlands Chamber of Commerce, said: "Interest rate rises do little to inspire business confidence and investment decisions.

"With the easing of inflationary pressures the MPC should be minded to support business by a cut in interest rates or at the very least maintaining at the current 5.75 per cent."

Business leaders in Coventry and Warwickshire said they would be shocked if rates were to rise this week.

The expectation is they will stay at 5.75 per cent.

The Chamber too believes that the next move should be down.

Louise Bennett, chief executive, said: "The rate rises over the past year have put a real squeeze on business but we have been told that we must grin and bear it because of the rise in inflation.

"But now it has suddenly dropped below the two per cent target and that is without really giving the rise in July a chance to take full effect.

"So I would be shocked if rates were to rise this week and very concerned for business in our region. I believe we can expect rates to stay the same this time but would hope any further movement before the end of the year would be down rather than up."