The Monetary Policy Committee (MPC) has decided to keep the Bank of England base rate at 4.25% following its latest review last Thursday.
Their decision was not a great surprise. Inflation is currently standing at 3.4% for May, which is a slight drop since April but is still a significant high after reductions in the rate earlier this year. The MPC considers that inflation will now remain at this level for the rest of the year before falling back towards 2% next year.
The MPC also noted their concerns over a softening in the labour market and continued global economic uncertainty, referencing the recent escalation in the conflict in the Middle East.
What this means for your business:
- Borrowing costs remain steady for now. The MPC’s comments suggest that further rate cuts could be made later in the year and lenders may respond to that by dropping their rates, even in advance of any future cut.
- No change for returns on savings. You should review any cash reserves you hold to ensure they’re earning interest.
- The inflation figures suggest that costs remain a concern, and this is likely to remain the case for the rest of the year. So, it could be important to plan conservatively for the coming months.
The Bank continues to take gradual, cautious steps when it comes to interest rates. If you’d like to review your funding or cash flow strategy, we’re happy to help.
Energy regulator Ofgem has announced a 4% increase in the energy price cap for the period covering 1 October to 31 December 2026. This increase reflects higher wholesale gas prices due to the ongoing conflict in the Middle East, with volatile global gas markets remaining the dominant driver of price changes.
UK businesses are facing a “cost of business crisis”, according to the British Chambers of Commerce (BCC). Its new cost-stack calculator shows government policy alone has pushed up an average firm's expenses by 70% over the past decade, adding roughly £827,000 a year in costs for a typical mid-sized business. About a quarter of the rise stems from the increase in employer National Insurance contributions, with the higher minimum wage and mandatory pension auto-enrolment also major contributors.
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