The Bank of England has cut interest rates by another quarter percentage point, bringing down the UK’S cost of borrowing to 4.5%, the lowest level since June, 2023.
And the signs are that more cuts could follow in the coming month. Two members of the Bank’s Monetary Policy Committee said they would have preferred to reduce rates even more, by a full half percentage point.
The Bank scales down its forecast for UK economic growth, however, forecasting that the UK economy will skirt clear of a formal recession only by the narrowest margin in the coming months, and downgraded its estimate of the economy’s ability to generate income.
It also predicts that inflation will rise, getting closer to 4% later this year.
The decision has already been warmly welcomed by UK business organisations and those representing home buyers and the construction industry.
At a Northern Ireland level, Ross Boyd, founder and director of Belfast-based chartered accountancy, RBCA, said, “The Bank of England has reduced the cost of borrowing to 4.5 per cent – arguably it is using the principal tool in its locker to stimulate economic activity, while managing inflationary pressures. Low and stable inflation is the foundation of a healthy economy and with further cuts promised, BoE may deliver on this vision in 2025. Further cuts throughout the year would indicate that may avoid recession in 2025, but focusing on the here and now, today’s announcement is unlikely to bring local businesses much confidence.
“Unfortunately, the cost of doing business in Northern Ireland continues to increase, thanks to Labour’s policy of making private business (notably the backbone of our local economy) carry the burden of increased public spending.
“Whilst reduced interest rates may lower borrowing costs, increased costs across the board will make any local Finance Director cautious, and cautious FDs tend to tighten belts and rationalise investment. If we are to grow our economy, our private sector needs confidence, especially when we compare the cost of doing business with our nearest neighbour.
“Last week the European Central Bank (ECB) reduced its key interest rate by 0.25 percentage points to 2.75 per cent, a fourth consecutive rate cut to encourage businesses to invest and keep on top of inflation. Couple that with a less punitive tax regime in Ireland – and you can understand why business owners here in Northern Ireland are frustrated.
“Resilience is built into our local private sector. We have a long history of entrepreneurial spirit. Imagine the growth it would bring if policy makers both here and in Westminster recognised that and addressed the fact that, on this island, we do not have a level playing field.”