Interest rates cut to record low of 1%

The Bank of England has cut interest rates to a new record low of 1% but trade leaders have warned access to finance is the real problem.

The Federation of Small Businesses (FSB) warned that the further 0.5% cut in rates would not provide the required boost. A recent FSB poll showed that 63% would prefer the rate to remain at 1.5% with only a quarter saying they would like a decrease — down from 58% in December.

"These figures suggest that the recent interest rate cuts are not having the desired effect and other means of economic stimulus are required," said FSB national chairman John Wright.

"Small businesses are clearly worried that this monetary policy has been used extensively over the last few months yet they are still struggling to access cheaper finance.

"The concern now is that if rates are cut any further there may not be too much more room for manoeuvre in the economy. The onus is really on the banks to start promoting these lower rates to fire up the economy."

Leading pub property agent Christie + Co voiced similar concerns. "While it is hoped that this further cut will help stimulate the economy, the previous cuts by the Bank of England have so far failed to have that desired affect, so it is questionable how much more impact this latest reduction will have," said Christie + Co director Jeremy Hill.

"It is now absolutely vital that the banks are encouraged to start lending at what is already a low rate of interest. This would hopefully get the economy moving forward and encourage an increase in transactional activity by giving purchasers the confidence that deals they have agreed on can be financed."