Worcestershire | Archive | 2003 | November | 07
From the archive, first published Friday 7th Nov 2003.
YESTERDAY'S rise in interest rates has received a muted reaction from business organisations, with some disappointed, but none surprised.
The rise, from 3.5 to 3.75 per cent - announced by the Bank of England's Monetary Policy Committee (MPC) - was expected in light of spiralling consumer debt and house prices.
But the Chamber of Commerce, Herefordshire and Worcestershire, said if it was the beginning of further increases, it would endanger the "upturn" in the manufacturing sector.
"This decision is acceptable when it is viewed as a reversal of July's precautionary cut of 0.25 per cent," said Christopher Harvey, head of membership and representation at the chamber.
"But if this initial increase in rates leads to a succession of further rises, it will endanger the upturn in the manufacturing sector recovery, which has been a long time coming. There are glimmers of hope for the sector - output grew in August - but there is still a long way to go."
Ken Hurst, director of The Manufacturing Alliance, in Wolverhampton, said the increase was "very bad news" for manufacturing.
"Manufacturing was just beginning to show signs of recovery and this is a kick in the teeth, quite frankly.
"A quarter of a per cent may not seem like the end of the world but the indications are it's the beginning of a rising trend.
"Some companies at the high end of manufacturing - where world-class design and innovation play a part - were showing signs of recovery but to aspire to being world class needs investment, which means you have to borrow. If the cost of borrowing goes up, manufacturers won't invest. And if we can't invest, we'll lose more jobs."
The Confederation of British Industry (CBI), meanwhile, said the increase was "understandable", as long as it was not the start of a "swift upward movement" in interest rates.
"Despite more encouraging world growth, we should be clear that the economic recovery is still at an early and extremely fragile stage," said Digby Jones, director-general.
"It would be misguided to opt for overly aggressive monetary tightening before that recovery has really taken hold."
But Ian Priest, from Bank of Scotland, in Worcester, said businesses would benefit from the longer-term stability brought about by the increase.
"While businesses will not generally welcome rate rises in the short term, the longer term stability that the Bank of England is aiming for will benefit all businesses," he said.
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