Independent retailers now have "another rising cost to worry about", British Independent Retailers Association (Bira) said after the Bank of England on Thursday (16), increased rates from 1 percent to 1.25 percent- the fifth consecutive rise- pushing them to the highest level in 13 years.
The Monetary Policy Committee voted 6-3 for the hike to 1.25 percent, the same breakdown as in May with the minority voting for a 50 basis-point increase.
Britain's benchmark rate is now at its highest since January 2009, when borrowing costs were slashed as the global financial crisis raged. It was the fifth time the BoE has raised rates since December when it became the first major central bank to tighten monetary policy following the COVID-19 pandemic.
The Bank said rising energy prices were expected to drive living costs even higher in October, but added it would "act forcefully" if necessary should inflation pressures persist.
Responding to the announcement, BIRA CEO Andrew Goodacre said it wasn't an unexpected move by the Bank of England.
"This latest increase in interest rates is not unexpected given the level of inflation we are currently experiencing,” Goodacre said.
"Whilst raising interest rates to curb inflation is an accepted policy, we have to be sure that higher rates will make a difference. The current inflation is not necessarily being driven by demand but rather geo political issues.
"For independent retailers they now have another rising cost to worry about – the cost of borrowing. During the pandemic the debt level for indie retailers saw a five fold increase. Rising interest rates increase the cost of this higher debt, increasing the significant cost burden already being placed on small businesses. Interest rates will also further dampen consumer confidence and demand – a double whammy for the independent retailer."
It comes as finances are being squeezed by the rising cost of living, driven by record fuel and energy prices.
Inflation is currently at a 40-year high of 9 percent, and the Bank warned it could surpass 11 percent later this year.
