Earlier today (3 August), the Bank of England raised interest rates for the 14th consecutive time, from 5% to 5.25%.
During the announcement, the Bank signalled for the first time that interest rates would remain higher until it got UK inflation - the rate at which prices rise - under control, saying it would make sure rates are ‘sufficiently restrictive for sufficiently long’.
Andrew Bailey, Bank of England governor, said: “We know that inflation hits the least well-off hardest and we need to make absolutely sure that it falls all the way back to the 2% target.”
Responding to the Bank’s announcement, Kate Nicholls, chief executive of UKHospitality warned that another rise in interest rates ‘only exacerbates the financial challenges many are grappling with’.
She said: “The inflationary pressures we’re facing as a nation are supply, not demand, led so we need to see urgent government action to bring down these business costs.
“A good starting point would be to rapidly implement the recommendations made by Ofgem last week to mitigate the energy crisis.”
Nicholls noted that hospitality businesses are particularly exposed to further rate rises, due mainly to the Covid loans many were forced to take out during the pandemic.
Recent data from the Insolvency Service showed that restaurants and cafés across the UK are going insolvent at a pace not seen for more than a decade.
A total of 3,347 eateries have been unable to pay their debts in the past two years to March 2023, with an average of six restaurants affected every day during the first three months of this year.
Of those restaurants declared insolvent, 98% of cases ended with the business being shut down.
“We would urge flexibility on loan repayments, including extension to terms, options to move to interest-only payments or delay altogether, and flexible arrangements from HMRC for tax payments,” Nicholls added.
