Hospitality industry welcomes interest rate cut
The hospitality industry has welcomed the Bank of England’s decision to cut interest rates to 5%, the first reduction in four years. The previous rate of 5.25%, a 16-year high, had been in place since August 2023.
Allen Simpson, deputy chief executive of UKHospitality, expressed hope that the cut would offer relief to businesses repaying Covid loans and encourage consumer spending.
However, he also emphasised the need for further interest rate reductions: “Now is the time to press the accelerator on growth,” said Simpson. “We need to see interest rates continue to fall, and for the government to urgently implement its promised reforms to business rates. Combined, this will see a meaningful and much-needed boost for hospitality businesses.”
Meanwhile, Michael Kill, CEO of the Night Time Industries Association, praised the move as a positive step for an industry struggling with high borrowing costs. He highlighted the potential for reduced financial strain, increased investment, job creation and stimulated consumer spending, which are crucial for the survival of nightlife venues and related businesses.
The Bank of England’s nine-member committee voted five to four in favour of the cut, attributing the decision to slightly easing inflationary pressures. However, governor Andrew Bailey cautioned against rapid or substantial rate reductions in the coming months. The Bank forecasts that inflation will rise to around 2.75% later this year before returning to its 2% target in 2025.
Bailey said: “We need to make sure inflation stays low, and be careful not to cut interest rates too quickly or by too much. Ensuring low and stable inflation is the best thing we can do to support economic growth and the prosperity of the country.”
Central banks worldwide sharply raised borrowing costs from near zero levels during the coronavirus pandemic when prices began to surge, initially due to supply chain disruptions caused by the pandemic and later exacerbated by Russia’s full-scale invasion of Ukraine, which drove up energy costs.
The Bank of England's interest rate cut yesterday was the first in four years, marking the first reduction since before the pandemic.
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