Interest rate hikes could jeopardise economic recovery

News Article - 24 May 2012
Category:

A leading business adviser warns that Britain's steady economic recovery could be placed in jeopardy if a premature interest rate increase is sanctioned by the Bank of England's Monetary Policy Committee (MPC).

Research from accountancy firm, BDO suggests the UK's economic growth could be stunted in the first six months of 2011.

Peter Hemington, a partner at BDO, said: "Although inflation is well above the Bank of England's two per cent target, inflationary pressures are not currently feeding into wages, as the labour market as yet to show signs of a sustained recovery - the likelihood of a wage-price spiral therefore still remain relatively low despite recent commodity price increases.

"Attempts to tame inflation could push up the price of sterling and make exports less competitive."

However, these fears may be quelled by recent information from HR directors across Europe indicating that businesses are successfully negotiating the transition from crisis to recovery.

The solid improvement of the UK's private sector could however force a rate rise in the next couple of months. Lloyds TSB's latest purchasing managers' index for England suggested that the strong performance of the private sector means inflation is still a real threat.

John Maltby, managing director of Lloyds TSB Commercial, said: "Our latest survey highlights a solid improvement in private-sector business activity, with companies operating in the manufacturing sector showing particularly strong growth.

"Across all English regions firms saw a steep increase in their cost burdens as they were once again hit by higher fuel and raw material costs."

With the unpredictable nature of inflation rates still a cause for concern businesses up and down the country are advised to take full control of their accounts processes to budget for unwanted inflation hikes.

Access business accounting software offers a powerful financial reporting solution with the ability to simplify budgeting, auditing and forecasting tasks and improve day-to-day financial efficiency. With standalone or integrated financials and accounting software businesses can keep a lifetime history of customer records and asset management with detailed analysis and presentation of data.

For more information, please call Access on 0845 345 3300.

Article keywords: Bank of England, Monetary Policy Committee, MPC, BDO, economic growth, Peter Hemington, inflationary pressures, wage-price spiral, commodity price increases, inflation, HR directors, Lloyds TSB, purchasing managers’ index, John Maltby, Lloyds TSB Commercial, Access business accounting software, financial reporting solution, integrated financials, asset management

---

More industry news

• Think tank warns UK may have already slipped back into recession
• Growing demand for HR staff in technology and international sectors
• Boosting business growth a ‘priority’ to avoid Eurozone slowdown
• HMRC launches alternative disputes pilot scheme this week
• December employment statistics disregard gloomy recruitment predictions
• Eurozone manufacturing PMI shows modest improvement
• UK scores highly for economic governance by ratings agency
• Government launches two-year project focusing on manufacturing sector
• Burden of regulation on UK businesses ‘too high’

Back to news home page »