SMEs unveil interest rate concerns
Small businesses and contractors in the UK have revealed they are concerned over the potential implications that an increase in interest rates could have on their firm.
The latest Business in Britain report from Lloyds Bank shows that financial concerns are currently at the forefront of business plans.
In 2014, 65% of firms questioned as part of the survey revealed concerns, although that figure has now increased to 67% at the start of this year.
Furthermore, 68% of respondents reported concerns over inflation too and how it could potentially harm their operations.
With inflation at a record low at the start of 2014, the economic backdrop could be viewed as a cause for worry for some businesses, especially those operating on tight budgets.
Concern over inflation is dropping compared to a year ago although Lloyds has attributed this to lower costs of raw materials as well as falling inflation.
The Lloyds survey also highlighted that 56% of UK firms have concerns over foreign currency and impact it could have on their exports or imports.
A drop in business confidence was reported, showcasing the need for firms to carefully manage their finances in the months ahead.
An interest rate increase could lead to an increase in running costs and operations, so it is vital that firms plan ahead for any potential changes.
Keeping a certain level of finance in reserve allows firms to manage their money effectively while those with concerns could consider business turnaround methods or restructuring.
Such approaches should enhance the way a business is run and ensure the long-term prospects of a company are built on solid foundations.
When a change will occur is unclear, with many analysts suggesting it is unlikely before May’s General Election.
It is however expected to rise at some point in 2015 before gradually increasing through 2016 so businesses need to consider how it may affect their long term plans.
Provided firms are prepared for the potential impacts upon their cash flows, customers and suppliers, they should be able to cope with the rate changes as and when they occur.
By Phil Smith