Interest rate rise is biggest cause for concern for two thirds of businesses

The possibility of a rise in interest rates is something that has been lurking in the shadows for some time.

As the recovery continues and the economy strengthens, many small businesses are concerned that growth could be hobbled by a rise in interest rates.

According to the latest Business in Britain report by Lloyds Bank, over two thirds (67%) of small and medium-sized businesses cite an interest rates rise as a cause for concern for their business.

This is a slight rise on last year’s report, in which 65% of businesses said interest rates rises were a cause for concern.

A similar number of companies (68%) also see inflation as a risk for their business.

This has decreased from 74% from the same time last year and reflects the recent fall in inflation and tumbling oil prices.

Trevor Williams, chief economist, Lloyds Bank Commercial Banking said: “The recent drop in oil prices has had a big impact on driving down price inflation and the Bank of England expects the annual increase in the consumer price index to fall further in the next few months, possibly turning negative in the spring.

“However the expected boost to consumer spending from falling oil prices means that an interest rate rise is still likely at some point over the next 12 months. Businesses need to be alert to this risk. The good news is that the fall in oil prices will also boost growth, and it is notable that that the Bank of England revised up its GDP growth forecast for 2015 and 2016. Business confidence about the prospects for the UK economy remains strong.”

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