The MPC voted by a majority of 6-3 to push up the bank rate, this is the ninth time in a row the rates have been increased.

The rise comes amid the continued cost of living crisis in Britain, and the Bank of England now expect UK GDP to decline by 0.1% in 2022 Q4, 0.2 percentage points stronger than expected in the November Report. Household consumption remains weak and most housing market indicators have continued to soften. Surveys of investment intentions have also weakened further.

The majority of the MPC judges that if the economy continues to evolve in line with projections, further increases in the bank rate may be required for a sustainable return of inflation to target.

Martin McTague, Federation of Small Businesses (FSB) chair, said that the ninth rate rise ina row leaves small businesses between a rock and a hard place.
He said: “Today’s rise in the base rate was widely predicted, but there is also a sense in the air that the decision to go for an increase – with today’s the ninth in a row – may be less of a one-way bet in coming months.

“This time last year, the base rate was just 0.1%. The precipitous climb in borrowing costs in under 12 months has hit small firms hard, eroding their margins at a time when many are struggling with the very cost increases which prompted the Bank of England to increase the rate in the first place.

“Energy costs are by far the biggest driver of the inflation that businesses and consumers are experiencing, and interest rate increases are doing little to rein in energy bills, while making it harder for small firms to keep the lights on.

“SMEs are collectively carrying £33 billion extra in debt, much of it index-linked, compared to January 2020, before Covid hit. Every basis point increase means extra pressure for those on floating rates, and a disincentive to apply for finance for firms looking to grow and invest.”

He added: “The Government’s forthcoming announcement on how it will support businesses once the Energy Bill Relief Scheme comes to an end must have a compelling offer for small firms, one in four of whom say they plan to close, downsize or restructure in the absence of a sufficient level of energy support after March.

“Many small businesses are struggling at the moment. They need certainty and support, to help them make the most of the festive season, and enter the new year in a spirit of optimism.”