It was confirmed earlier today (1 August) that the cost of borrowing would fall by a quarter of a percentage point to 5% from 5.25%.
A cut in rates had been mooted after headline inflation held at the Bank’s target of 2% for a second consecutive month in June.
Rates rose steadily following the pandemic in response to rising inflation, leaving many hospitality businesses exposed as a result of the loans they forced to take out during the Covid crisis.
Michael Kill, CEO of the Night Time Industries Association (NTIA), a leading advocacy group representing the nighttime economy, said today’s announcement was a significant step in the right direction’ for the sector.
“High interest rates have placed a substantial burden on businesses within the nighttime economy, exacerbating financial pressures and hindering recovery efforts post-pandemic,” he said.
“The reduction in interest rates is a positive signal that will help alleviate some of these financial strains, providing much-needed relief to our members.”
Confirming the interest rate cut, the Governor of the Bank of England, Andrew Bailey, warned savers and borrowers to not expect large reductions over the coming months, amid concerns about lingering risks to the economy.
“We need to make sure inflation stays low and be careful not to cut interest rates too quickly or by too much,” he said.
“Ensuring low and stable inflation is the best thing we can do to support economic growth and the prosperity of the country.”
In its own response to the cut, UKHospitality said interest rates needed to fall further.
“I hope this will provide some relief for businesses that are continuing to pay back Covid loans, and encourage consumers to spend,” said Allen Simpson, deputy chief executive of UKHospitality.
“Now is the time to press the accelerator on growth. We need to see interest rates continue to fall, and for the Government to urgently implement its promised reforms to business rates. Combined, this will see a meaningful and much-needed boost for hospitality businesses.”