UK firms unlikely to raise rates, BoE eases concerns Via Investing.com

In a positive turn for the UK economy, a recent survey shows UK firms are looking to raise prices in the future, which will influence the Bank of England’s (BoE) decision-making on interest rates. A British Chambers of Commerce (BCC) poll found that 39% of its member firms expect to increase prices in the next three months, a significant drop from the 46% recorded in a previous survey published in April.

The BCC’s head of research noted a significant reduction in inflation concerns among businesses, suggesting a potential cut in the Bank Rate would help lower borrowing costs. The BoE is set to cut its benchmark bank rate to 5.0% from the current 5.25% by August 1, with investors predicting a more than 50% chance after headline inflation falls to the BoE target of 2%.

The survey, which collected responses from 4,967 companies with fewer than 250 employees between May 13 and June 10, found improvements in sales and cash flow. These metrics returned to pre-pandemic levels in the second quarter of 2024. Additionally, the proportion of companies expecting business volume to increase in the next 12 months rose from 56% to 58%.

Despite these positive trends, the survey highlights that 75% of companies do not plan to increase their investment levels, although this varies by sector. For example, 42% of transportation and logistics companies reported increased investment levels, compared to 19% of retail companies.

Newly appointed Prime Minister Keir Starmer has expressed hope that the new political stability of years of Conservative leadership will encourage more companies to invest. The BCC research findings may be a step in that direction, indicating a more optimistic outlook for the UK economic outlook.

Reuters contributed to this article.

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