Sector 'disappointed' as interest rates frozen for sixth time
The Bank of England (BoE) yesterday (Thursday 9 May) announced interest rates would remain at 5.25% for a sixth consecutive time in a bid to meet its 2% inflation target.
UKHospitality (UKH) chief executive Kate Nicholls said: “It’s disappointing we’re not seeing interest rates ease when we have seen sustained falls in the rate of inflation.
“Many hospitality businesses are still struggling with Covid-related loans repayments due to persistently high interest rates, and it continues to suck money away from investment and business growth.”
The bank’s Monetary Policy Committee (MPC) voted by a majority of seven to two in favour of holding the figure, with the two members not in favour of holding rates preferring to reduce the number by 0.25 percentage points to 5%.
Financial headroom
Furthermore, the BoE said monetary policy would need to “remain restrictive for sufficiently long to return inflation to target” sustainably.
Nicholls added: “Hospitality has a track record of driving economic growth, creating jobs and helping regenerate towns and cities, when it has the financial headroom to invest.
“A lower interest rate is a key component of freeing up cash for businesses, and I hope to see rates come down next month.”
The latest figures from the Office for National Statistics (ONS) showed the headline rate of inflation fell from 3.4% to 3.2% between February and March this year, with food prices, notably meat, having made the largest downward contributions to the number.
Despite this, operators last month told The Morning Advertiser (MA) the ease to inflation was not being reflected for hospitality firms.
Right direction
However, when rates were held last month, owner of Top 50 Gastropub Brendan Padfield, who runs the Unruly Pig in Suffolk, told The MA there were “some positives” to be found in the unchanging figure.
“In the short term, this means the hospitality sector will continue to face challenging times and it needs so much support.
"But however very hard this decision for businesses, on a half full as opposed to half empty analysis, perhaps there are still some positives here.
"The first positive is the obvious, the BoE remain rightly resolute in their determination to use interest rates to tackle inflation, which is critical to overall confidence and it is only through confidence in the economy that we’ll get bums back on seats in our pubs and restaurants”, he said.
Padfield added the fact no member of the MPC voted to increase rates was the “best indicator in years” the economy is moving in the right direction.
