Rising interest rates not 'all doom and gloom'

03-Feb-2023 - Last updated on 03-Feb-2023 at 10:16 GMT

Interest rate increases: not all 'doom and gloom' for the sector but Chancellor must keep the 'added pressure' in mind ahead of Spring Budget (Credit: Getty/DNY59)

Related tags Finance Legislation Government Bank of england

Interest rate increases are not all “doom and gloom” for the hospitality sector however it is important the Chancellor takes the added “pressure” into account in the upcoming Spring Budget.

This comes as the Bank of England yesterday (Thursday 2 February) announced it would be increasing its base interest rate from 3.5% to 4% in a bid to combat inflation, reportedly the highest increase for 14 years.

Interpath Advisory head of debt advisory John Meisner said: “It isn’t all doom and gloom for the hospitality sector.

“This rise in interest rates has been priced into mortgages and fixed rates for many months.

Downward pressure

“In fact, the notable softening of the tone of statements from the Bank of England, should give confidence to companies and consumers alike that interest rates are starting to top out; the markets are now pricing in downward pressure on rates by the end of 2023.

“Whilst still challenging, lender and investor sentiment towards the leisure and hospitality sector has notably improved post-Christmas.”

The bank also claimed the UK was still expected to enter into recession this year, though the slump was likely to be shorter than previously predicted.

However, UKHospitality chief executive Kate Nicholls shared via Twitter the increase to interest rates added “significant pressure to businesses with CBILS and other debt”.

This adds significant pressure to businesses with CBILs and other debt - important Chancellor takes this into account in his forthcoming Budget to give hospitality and other sectors a breathing space and help to address costs of business to avoid further price hikes & inflation https://t.co/U6mQRYc8Sg
— Kate Nicholls OBE (@UKHospKate) February 2, 2023

In addition, Nicholls said it was “important” Chancellor Jeremy Hunt took this into account in his forthcoming budget to give hospitality and other sectors “breathing space and help to address costs of business to avoid further price hikes & inflation”.

Support package

This follows news from the International Monetary Fund (IMF) earlier this week that the UK economy would contact 0.6% in 2023, making it the worst performing against other advanced economies and the only one to contract this year.

Additionally, new data from the Campaign For Real Ale (CAMRA) recently showed some 21 pubs a week closed in the last half of 2022, prompting to consumer group to join calls for a dedicated support package in the Spring Budget.

CAMRA chairman Nik Antona said: “Without a support package in the Spring Budget, we risk losing more pubs which are at the heart of community life and play such a crucial role in bringing people together and tackling loneliness and social isolation.

“With the cost of doing business rocketing, energy costs sky-high and customers tightening their belts it is little wonder that hundreds of pubs across the country are closing for business or are standing empty.

“We know the licensed trade can thrive and drive growth in the economy, but only if the Government acts quickly.”