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Cumberland and Westmorland Herald
  • News
    Mandatory payrolling of Benefits in Kind delayed

    Mandatory payrolling of Benefits in Kind delayed

    Youngsters raise cash for Penrith food bank

    Youngsters raise cash for Penrith food bank

    Commissioner promises improvements to Cumbria’s fire and rescue service

    Commissioner promises improvements to Cumbria’s fire and rescue service

    Illegal campers fined for causing significant damage in Lake District

    Illegal campers fined for causing significant damage in Lake District

    Man dies after falling from A66 bridge

    Man dies after falling from A66 bridge

    New senior coroner appointed for Cumbria

    New senior coroner appointed for Cumbria

    Red letter day for young Skelton farmer

    Red letter day for young Skelton farmer

    Cumbrian bellringers success in national contest

    Cumbrian bellringers success in national contest

    Bid to turn barns into homes get go-ahead

    Bid to turn barns into homes get go-ahead

  • Sport
    New management set to lead Appleby Football Club

    New management set to lead Appleby Football Club

    Success for fighting squad

    Success for fighting squad

    Penrith skipper Nicky Burns calls on team to keep winning

    Penrith skipper Nicky Burns calls on team to keep winning

    £100,000 target for new changing rooms extension

    £100,000 target for new changing rooms extension

    Medal success for Upper Eden tug-of-war team

    Medal success for Upper Eden tug-of-war team

    Eden man competes in Hyrox World Games

    Eden man competes in Hyrox World Games

    Double national triumph for Stuart Robinson

    Double national triumph for Stuart Robinson

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    Patterdale’s Eden Eagles make history

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    Penrith teen crowned British vault champion

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Home Expert advice
This article appears as part of a paid partnership with Armstrong Watson

How can businesses cope with rising interest rates?

By Stephen Dinsmore, corporate finance manager, Armstrong Watson

by CWH
24 May 2023
in Expert advice
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Stephen Dinsmore

Higher costs of borrowing – as a result of the Bank of England’s decision to raise interest rates to 4.5 per cent – will make it more expensive for businesses to finance their operations.

The bank’s Monetary Policy Committee (MPC) announced the twelfth successive increase in borrowing costs on May 11, when it raised the base rate by 25 points to its highest rate since October 2008.

The impact of the rate rise will vary from business to business, with those relying on debt financing hard hit as their borrowing costs increase.

Businesses with more cash on hand will perhaps feel less of an impact, though they could see their profits squeezed as they’re forced to pay higher interest rates on their loans. Sadly, those businesses already struggling with escalating borrowing costs, added to many other cost pressures, will be the hardest hit.

The higher interest rates could lead to a slowdown in economic growth and businesses that rely on consumer spending will feel the impact of this as people will have less money to spend.

The Institute of Chartered Accountants in England and Wales (ICAEW) says the MPC risks overdoing the rate hikes as most of the previous interest rate rises are yet to pass through to households and businesses and this could “aggravate the cost-of-living-crisis”.

With this in mind, there are steps you can take to try to mitigate the impact of increased interest rates on your business, such as:

  • Review finances – reduce debt levels by paying down loans or refinancing at a lower interest rate
  • Improve cash flow – increase sales, look at ways to reduce costs or take steps to collect payments more efficiently
  • Invest in efficiency – efficiency measures, such as automation or new technology, can help to reduce costs
  • Diversify revenue streams – focus on growing your business by expanding into new markets or developing new products and services

While the Bank of England is raising interest rates in an attempt to control inflation, businesses could face a challenging economic environment in the coming months.

Higher rates could have a number of unintended consequences and it is important to monitor the impact of the rate rises on your business and take steps where possible to mitigate this.

For advice about how you could improve your business’s financial position please get in touch.

Contact Stephen Dinsmore on 07788 712078 or email Stephen.dinsmore@armstrongwatson.co.uk

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