Home Insights Brexit update: Base rate fall to record low

Brexit update: Base rate fall to record low

By Ensors Team
5th Aug 2016

As was widely expected, following the August meeting of the Bank of England’s Monetary Policy (MPC), the base rate has been cut to a record low of 0.25%. The MPC had little room to manoeuvre  following the recent publication of the first real post-Brexit economic data which pointed towards an economic slowdown.

The cut in base rate grabs the headlines and for those SMEs with borrowings, or those who are planning to borrow, this will be good news. For the many SMEs with cash reserves this will not be welcome news at all.

Also announced was a quantitative easing programme buying both Government and corporate debt and a Medium Term Funding Scheme; the latter being designed to enable the Bank of England to lend to banks close to the new base rate level such that the benefit of the lower rates can be passed onto businesses and consumers alike.

While the monetary stimulus should benefits SMEs for many the benefit will probably be more indirect than direct. It is of course important to set this in context and remember that the background for the MPC’s actions is that they are seeing signs of a slowdown and this pessimism is embodied in their revised forecasts. 

With still some months until the Autumn Statement the Government will likely wait to see how the economy performs with the new package of monetary measures, measures that will likely have a more direct impact on SMEs.

Our partners are available if you would like an independent viewpoint on how Brexit could impact your business.  Please don’t hesitate to speak to your client partner or myself, Malcolm McGready, if you would like to discuss further.