BusinessBusiness RecoveryInterest rate cuts…

Interest rate cuts...

It might have been a desire not to copy the US, but again, Steady Eddie and his MPC team at the Bank of England have resisted the urged to cut interest rates.

Sir Edward George is in a very tricky position – the manufacturing industry, which to all intents and purposes is in recession, has been crying out for an interest rate cut to ease its borrowing burdens, while the housing boom continues to be fuelled by the lowest interest rates for decades. He would be damned if he cut, and damned if he didn’t.

As the Liberal Democrat shadow chancellor Matthew Taylor rightly says, the Bank has only one financial instrument to tackle this two-speed economy – while not wanting to fuel an already worrying housing boom, especially in the South East, failure to ease the manufacturers’ pain destroys jobs.

But there is another worrying trend that has been exacerbated by low interest rates – the ever-growing credit boom is feeding through to increasing numbers of personal bankruptcies.

David Buchler, R3 president, says these high numbers of ‘consumer’ bankruptcies may eventually damage the wider economy, especially considering its current reliance on consumer credit. Add to this the easing of bankruptcy procedures and the destigmatisation of becoming bankrupt, and the resulting increase of people simply walking away from their debts could cost the economy dear.

But we are not there yet, and No 11 Downing Street and the Old Lady of Threadneedle Street must be keeping their fingers crossed we never get there.

The housing market will correct itself – current price increases are unsustainable as the first-time buyer, that all important bottom rung of any housing ladder, is being driven out of the market, so sales will become harder to complete.

Consumer credit providers will have a rush of common sense to their heads and might become less generous with their credit.

Leaving room for a cut in interest rates. Fingers crossed.

  • Philip Smith is deputy news editor at Accountancy Age.

Related Articles

Investment firm acquires Avon Steel Company Limited

Business Recovery Investment firm acquires Avon Steel Company Limited

7d Emma Smith, Managing Editor
Manchester law firm enters into administration

Business Recovery Manchester law firm enters into administration

7d Emma Smith, Managing Editor
KPMG appoints new global head of insolvency

Business Recovery KPMG appoints new global head of insolvency

4w Emma Smith, Managing Editor
EY hired by Carillion to review finances

Accounting Firms EY hired by Carillion to review finances

5m Alia Shoaib, Reporter
Using insolvency as a debt recovery tool

Business Recovery Using insolvency as a debt recovery tool

6m Emma Smith, Managing Editor
UK government should support mid-sized businesses to create a ‘new economy’ post-Brexit, says BDO report

Business Recovery UK government should support mid-sized businesses to create a ‘new economy’ post-Brexit, says BDO report

8m Alia Shoaib, Reporter
Over 800 jobs saved as Endless LLP acquires Jones Bootmaker

Business Recovery Over 800 jobs saved as Endless LLP acquires Jones Bootmaker

9m Emma Smith, Managing Editor
FRP Advisory expands operation with new office, partner appointments

Accounting Firms FRP Advisory expands operation with new office, partner appointments

10m Emma Smith, Managing Editor