FSB urges Bank of England to hold interest rates at 0.5 per cent

The Federation of Small Businesses (FSB) is urging the Bank of England to keep its nerve and hold interest rates at 0.5 per cent when the Monetary Policy Committee meets to set the rate.

With unemployment reaching 2.5 million at the end of 2010, the VAT and fuel duty rise in early 2011 and the Government’s austerity measures yet to take full effect, the FSB is concerned that an increase in interest rates will do more harm than good to the millions of small businesses that are already suffering.

Small business confidence fell dramatically in the final quarter of 2010 and the outlook for 2011 remains muted, according to the FSB ‘Voice of Small Business’ Index. Confidence in the final quarter fell by -13.2 per cent as service sectors suffered badly in the run up to Christmas.

The FSB is concerned that a rise in the base rate will only fuel small firms’ lack of confidence and will hinder, rather than create, an environment for growth.

John Walker, National Chairman, Federation of Small Businesses, said:

“The Bank of England must look to promote growth and leave tackling inflation as a medium term priority, at least until the impact of the increase in VAT and fuel duty has levelled out.

“Small business confidence is low, so it is vital that this important sector can begin to grow again. While we understand that an increase in the base rate will help to alleviate inflation, we are concerned that with already high unemployment and the figures likely to rise as the full impact of public sector cuts bite, that we must avoid a jobless recovery.

“Inflation is a worry for everyone and the Government does have tools at its disposal to help to alleviate pressures – namely through the introduction of a fuel duty stabiliser which will remove one of the key drivers for inflation.”

ENDS

Notes to Editors

The FSB is the UK’s leading business organisation with over 210,000 members. It exists to protect and promote the interests of the self-employed, and all those who run their own business. More information is available at www.fsb.org.uk

The Voice of Small Index press release is available on the website and the report is available at www.fsb.org.uk

ISDN facilities are available for broadcast media interviews

Contacts

Andrew Cave, Chief Spokesperson: 07917 628991
Prue Watson: 020 7592 8121/ 07825 125695 prue.watson@fsb.org.uk
Sara Lee: 020 7592 8113/ 07595 067068 sara.lee@fsb.org.uk

For regional FSB contacts please go to www.fsb.org.uk