Bank of England base rate increased by 0.5% to 2.25% – the seventh increase in a row

The Bank of England base rate has increased by 0.5% to 2.25% following its Monetary Policy Committee (MPC) decision. This is the seventh time in a row interest rates have increased.

The Committee’s aim is to meet the inflation target of 2% in a way that helps to sustain employment and growth.

Following their meeting on 21.09.2022, it voted to increase the Bank Rate by 0.5 points, to 2.25%. voting was as follows:

• Five members voted to raise the Bank Rate by 0.5 percentage points
• Three members preferred to increase the Bank Rate by 0.75 percentage points, to 2.5%,
• One member preferred to increase the Bank Rate by 0.25 percentage points, to 2%.

It was noted that the twelve-month CPI inflation fell slightly to 9.9% in August from 10.1% in July.

The MPC states that considering the announced Energy Price Guarantee, the peak in CPI inflation is likely to now be lower than what was projected in the August Report, at close to 11% in October. The committee believes that inflation is expected to remain higher than 10% during the coming months, before it starts to fall back down.

 When will interest rates rise again with the next Bank of England base rate change?

The Bank of England reviews the performance of the economy and whether interest rates should change eight times a year. The next review is scheduled for Thursday 3 November. After this, the remaining dates for 2022 is Thursday 15 December

Will the interest rate rise affect your business?

Rises in interest rates can affect businesses in several ways, so it is important to understand this.

Innovation and Investment – consider if interest rises affect your spending on investment and innovation? Ensuring R&D tax credits are correctly claimed may greatly assist here.

Current business loans – examine how additional interest costs effecting business loans and company credit cards could impact your cashflow and profits.

Short term credit – consider how reliant the day-to-day operations of the business is on short-term bank credit, and how will rate rises alter this.

Foreign currency – where businesses trade internationally, or those that accept foreign payments, consider how rate rises could affect the value of foreign currency income or reserves.

HMRC & late taxes – the late payment interest rate (currently 3%) is likely to rise

Alexander & Co – business advice

For accountancy and taxation advice to help your business, Alexander & Co can assist you. From providing advice on R&D tax credits for innovation and investment, through to business restructuring and advice on becoming more tax efficient, our corporate advisors are on hand to ensure you receive expert advice.

To discuss our services and how we can assist your business, please fill in the form below, call us on 0161 832 4841 or email info@alexander.co.uk