We could finally be moving closer to an interest rate increase in the UK, as the number of people out of work fell by 167,000 in the three months to November to 2.32 million. This is the largest drop since 1997 as ONS figures suggested that 280,000 found employment to take the total number of UK employed to 30.15 million and the number of 16-24 year olds unemployed fell by 39,000.
The Bank of England previously said they would consider increasing interest rates when unemployment hit 7% and we’ve now reached 7.1% so that increase might be getting closer. So, briefly, what will that mean for small businesses?
Loan repayments will go up: Any money that the business owes its debtors will most likely mean increased repayments if they are not on a fixed rate plan.
Customers may have less disposable income: They may not be able to spend as much money on your business because their mortgage repayments will go up.
We will enter the next stage of recovery: Interest rates cannot continue at 0.5% forever unless we are happy to continue with an economy on life support. Luckily most people have been sensible and not used the low interest rates as an excuse to take on more debt! Ultimately a staggered interest rate increase should stabilise the economy a bit more and hopefully mean that wages begin to rise again.
Did your small business contribute to the employment increase by hiring someone last year? Let us know.