Swindon’s businesses received an exclusive insight into the Bank of England’s quarterly inflation report on Thursday February 23, at the Monahans Bank of England Breakfast.
The Bank of England’s inflation forecast was recently upgraded to a more positive outlook due to an increasingly favourable global situation, with markets in the United States and Europe gaining momentum, however Donna Kehoe, Bank of England representative for the South West warned of the risks associated with this growth.
The rate of inflation has been falling for a number of years and current predications are that we will most likely see a rise in the near future. Both short term and long term interest rates are also rising at levels above previous predictions.
This could herald an impact on businesses in our region which is currently being overcome by continued high consumer confidence. Although the availability of credit has increased over a number of years with the Bank of England putting measures in place to encourage banks to lend to businesses, consumer credit and personal debt has increased and is close to pre-crisis levels.
Consumers are more likely to borrow, especially in fluctuating interest rate products like payday loans and credit cards, when they have confidence in the market – fuelled by having a feeling of stability and wealth. However as inflation rises and wage growth remains static consumers will start feeling the pinch and spending less. Together with sterling still currently being volatile, and expected to remain like this for the next few years, as well as increasing labour costs due to wages only rising in line with inflation and Auto-Enrolment costs, businesses may find it difficult to pass on price rises to consumers who are likely to become more conservative with their spending.
The result being that the Bank of England is predicting a slight slowdown in GDP growth and after a small initial increase in employment rates, a decrease to a level just below what it is currently.
Iain Black, Partner at Monahans said: “It is positive to hear that as a country, the financial situation we’re in today is better than what was expected a year ago. It is easy for businesses in the area to think that what may be happening in foreign markets doesn’t have an impact on them locally, however the trickledown effect will touch us all both as businesses and consumers.
“It is possible to plan for these predications and ensure your business is in as strong a position as possible to mitigate changes to the market and taking expert advice from an early stage can enable you to put measures in place to build lasting business resilience.”
The next Monahans Bank of England Breakfast will take place on May 18, to register your interest email firstname.lastname@example.org.
To find out more about Monahans, visit www.monahans.co.uk
Pictured above from left to right: Iain Black, Monahans, Donna Kehoe, Bank of England, Steve Fraser, Monahans