Interest rate hikes cause business confidence to fall

31 Jul 2023

A survey carried out by the Federation of Small Businesses (FSB) has revealed that confidence amongst UK small businesses fell recently as a result of interest rate hikes.

The FSB's Small Business Index (SBI) fell to -14.2 in the second quarter of 2023, down 11.4 points from the first quarter.

According to the SBI, two in five small firms experienced a drop in revenue over the second quarter, with only one in three seeing an increase. Additionally, three in ten small businesses which applied for credit were offered an interest rate of 11% or more, the FSB found.

The business group said that interest rate hikes have added pressure to index-linked debt repayments. The decline 'reflects the downbeat economic conditions small firms had to navigate over the second quarter', the FSB stated.

Commenting on the figures, Martin McTague, National Chair of the FSB, said: 'There are undoubtedly challenges ahead. Small firms are already feeling the impact of rate rises on their margins, and through lower consumer demand, and further increases will undermine the prospects of a recovery in confidence.

'Small businesses are very alive to the danger that interest rate rises will overshoot the level needed to curb inflation, and will instead act as a drag on economic expansion.'