Interest Rate Rise Must Wait for Recovery

Interest rates must not rise while “recovery remains slow”, say experts

Business groups have urged the Bank of England to keep interest rates down in May, as new figures for the UK economy confirmed only slow growth in the first quarter of 2011.

The figures released by the Office for National Statistics show that the UK economy grew by 0.5% in the first three months of 2011. The growth reduced the likelihood of a double–dip recession after the economy contracted 0.5% in the final quarter of 2010. However, business groups remained cautious and continued to urge the Bank of England not to raise interest rates, despite the high rate of inflation — currently 4% (CPI).

Confederation of British Industry director–general, John Cridland, said:

“Growth of 0.5% in the first quarter is in line with our expectations and, while encouraging, it does reaffirm our view that the recovery remains slow.”

“The main reason the growth figures were not stronger is the contraction in construction, with the overhang into January from the bad weather. February’s construction figures show some recovery.”

Forum of Private Business spokesman, Chris Gorman, said:

“Interest rates need to stay as they are for the foreseeable future.

“It’s a very delicate time and we could do without any significant interest rate rises, which would take even more potential consumer’s spending money out of the economy. This will always have a knock–on effect on small businesses.”

Gorman advised small–business owners to stay positive in the coming months, and ensure their customer base is as wide as possible.

“Future–proof your business: make sure you’re not overly reliant on one particular client or supplier, especially if you do public sector work. [Ensure] you have alternatives if work with a particular public body dries up or if the margins on that work get reduced.

“Just because the economy is sluggish at the moment and we’re seeing quite flat GDP that doesn’t mean that there aren’t opportunities out there.”

Interest Rate Rise Must Wait for the economic Recovery

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