BDO comments on the rise in interest rates

Ed Dwan, partner at business advisory firm BDO, commented

“A second interest rate hike in three months is not a surprising move from the MPC. Combatting rising inflation rates will remain a priority as individuals and businesses battle rising costs across the board. Earlier today it was announced that households will face a record increase of 54% on energy bills, with concerns this will lead to a cost of living crisis.

“Despite the Omicron COVID-19 variant curtailing the Christmas and January trading period, many businesses have continued to demonstrate resilience and optimism. BDO’s recent survey of 500 mid-sized businesses found almost two fifths (38%) of businesses are starting 2022 ahead of their forecasts and 60% expect to return to pre-COVID revenues in the next 12 months.

“However this recovery is under threat. More than a quarter (27%) of businesses predict that inflationary pressures, higher fuel and energy costs and increasing interest rates will be their biggest barriers to growth in 2022. This is of even more concern for businesses in the hospitality and leisure sector, many of whom already face a much longer recovery post-pandemic due to the long-term impacts of ongoing COVID-19 restrictions on their operations.

“The rate rise may play a role in easing inflationary pressures, but this is just one of the many issues businesses are facing. For the sectors hit hardest by the pandemic, Brexit and now rapidly rising costs, the recovery is far from over. The Government must provide adequate support to ensure these businesses not only survive, but thrive, post-pandemic.”