Business Confidence Remains Fragile Amidst Continuous Interest Rate Hikes
Business confidence among start-ups and SMEs continues to waver as the Bank of England prepares for its projected 14th consecutive interest rate increase, as per a survey conducted by the Institute of Directors (IoD).
The ongoing surge in interest rates and soaring prices have contributed to a lingering sense of uncertainty, with business confidence registering at minus 30 points—a mere one-point increment from the IoD’s June assessment.
Despite the Chancellor’s declaration during the Spring Budget that the UK had managed to steer clear of a technical recession, the anticipated 14th interest rate hike has significantly dampened business sentiment.
Industry Perspectives:
Steven Mooney, CEO of FundMyPitch, emphasized the need for support from the government, investors, and networks to help entrepreneurs and fast-growing start-ups thrive amidst the challenges of rising interest rates and inflation. He stressed the significance of SMEs, which form a substantial portion of the UK economy, contributing innovative products, services, and skilled jobs nationwide. During times of diminished business confidence, external stakeholders, such as the government, must step in with crucial support and guidance to ensure a resilient start-up ecosystem.
Laimonas Noreika, CEO and Founder of HeavyFinance, highlighted the potential repercussions of low business confidence and restricted funding on early-stage businesses. He pointed out that these challenges might divert their focus away from essential areas such as climate action. To combat this, Noreika called upon the government and investors to wield their influence and offer financial backing to encourage environmentally-friendly and robust business models. Putting climate and ESG at the forefront of business priorities through measures like Article 9 fund investments can drive critical climate action and positively impact the environment.
Sjuul van der Leeuw, CEO of Deployteq, underscored the importance of customer retention during economic turbulence. Recommending loyalty schemes and targeted email marketing, he emphasized the value of nurturing existing customer relationships. Such personalized approaches increase the likelihood of repeat business even in times of uncertainty. Additionally, data-driven insights play a vital role in decision-making, helping businesses strategize technology and marketing efforts to facilitate growth in challenging times.
Kitty Ussher, Chief Economist at the IoD, observed that inflation has proven to be more persistent than initially anticipated. As a result, more companies are feeling the negative impact of rising interest rates, leading to a prevailing sense of caution compared to the previous spring.
In the face of these economic challenges, businesses, government bodies, and investors must unite to provide the necessary support and resources to maintain a strong and resilient business landscape. By prioritizing environmentally sustainable practices, customer loyalty, and data-driven decision-making, businesses can weather the storm and emerge stronger on the other side.