The Bank of England's decision to cut interest rates to the record low of 0.25%, and introduce further economic stimulus, has been met with mixed reaction from the UK's business community.
In addition to the rate cut, the Bank's Monetary Policy Committee (MPC) increased quantitative easing programme by £60 billion to £435bn, and introduced two new corporate bond-buying programmes worth £10bn and up to £100bn, respectively.
But there has been a wide range of positive and negative reactions from business leaders.
Mike Cherry, national chair of the Federation of Small Businesses (FSB), said the country's small businesses would be pleased with the cut in interest rates, but warned of concerns over the longer-term implications of Brexit on the economy.
He said: "Lower rates should lead to cheaper borrowing costs, making finance more affordable and helping to support business investment. Small firms will also welcome the boost to household spending power and consumer demand.
“However, FSB members do have concerns about the longer term economic outlook. There is a real risk that sterling will depreciate even further, which could benefit the UK’s visitor economy and small exporters, but could also affect prices, inflation and investment. Medium-term forecasts indicate a slowing of the economy. We urge the Bank of England and the new Prime Minister to carefully assess the effects of today’s cut and do all in their power to boost economic confidence and growth.”
There were criticisms from small businesses, however. Angus Dent, CEO of business crowdlender, ArchOver, argued that these measures send the wrong message to small business owners.
"While this reduction may seem a good idea in some respects, the move to stimulate the market to borrow more and save less sends a strong message of ‘no confidence'," he said. "Any SME (small and medium-sized enterprise) considering raising money is unlikely to be swayed by a cut of 0.25% when rates are already at historic lows. If anything, they will interpret the move as one that creates uncertainty and supports the view that the UK is about to talk itself into recession after the Brexit vote. A more positive message might have been achieved by putting interest rates up."
The CBI, the UK's largest business lobby group with over 200,000 members, was much more welcoming of the measures. The organisation's chief economist, Rain Newton-Smith, said: "The combination of a rate cut and more quantitative easing should be a shot-in-the-arm for business and consumer confidence, lowering borrowing costs and keeping liquidity flowing through the economy.
"The Bank's action will help restore confidence in the UK economy and what's now most important to businesses is that the government develops a clear plan and timetable for EU negotiations. At the same time, it must press ahead with domestic policy priorities, especially infrastructure decisions, which will allow firms to get on the serving their customers and investing for the future."
Like many, Kevin Caley, founder and chairman of peer-to-peer lender ThinCats, believes the Bank of England's measures will only go so far, and economic growth and only really be stimulated if the government introduces new policies. He said: "A base rate cut can only feel like a further tax for the millions of people who rely on interest from their savings and pension investments. Monetary policy is a useful tool, but unless the Government can find a way of achieving meaningful economic growth, we are likely to be in this situation for many more years.”
