FSB urges interest rate cut

By James Wilmore

- Last updated on GMT

Related tags: Small businesses, Monetary policy, Interest rate

The Federation of Small Businesses (FSB) is calling for an interest rate cut to help save small businesses from collapse. An FSB poll released this...

The Federation of Small Businesses (FSB) is calling for an interest rate cut to help save small businesses from collapse.

An FSB poll released this week revealed that almost 1.5million small businesses risk going bust with unemployment figures set to rise as a result.

But the FSB, which has hundreds of licensee members, argues the problem could be eased if, as hoped, the Bank of England's Monetary Policy committee cuts interest rates to four per cent when it meets this week.

John Wright, the FSB's national chairman, said: "This should hopefully encourage banks to lend and secure the future of millions of businesses.

"We don't want to head the way of the early 90s when 1,000 small businesses a week were collapsing. This can be prevented if the banks relent and release money and consumers start to spend a bit more. All this is reliant on that cut in interest rates."

However some insolvency experts believe a one per cent cut would do little to rescue ailing businesses.

Meanwhile, nearly three quarters of FSB members back interest rate cuts, according to its poll. One third of the 4,633 respondents said they would have to close down if the current credit crisis continued.

And more than half recorded a decrease in trade in the last two months.

Just under 40 per cent of respondents said they felt less optimistic about the future in the last two months, while a number indicated that a rise in unemployment figures was a definite reality.

Around one fifth said they had already been forced to reduce their employee numbers, while 32 per cent were considering it.

Another third were considering reducing the number of hours their employees worked, while 14 per cent said they had already cut back on hours.

Nearly 70 per cent of small businesses had either put a freeze on hiring or were thinking of doing so.

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