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Economic Development

Interest rate rise 'further headache' for business, says British Chamber of Commerce

The Bank of England has increased the base rate to 3% in a bid to ease º£½ÇÊÓÆµ inflation

Bank of England governor Andrew Bailey(Image: Photo by Kirsty O'Connor - WPA Pool/Getty Images)

The Bank of England's latest interest rate rise is "no surprise" but is a "further headache" for businesses, according to a senior figure at the British Chamber of Commerce (BCC).

The base rate was increased to 3% from 2.25% on Thursday (November 3) - the biggest hike for three decades - as the bank made a bid to tackle soaring inflation in the º£½ÇÊÓÆµ. It is the eighth consecutive time the bank has hiked interest rates and it has warned Britain is facing its longest recession since records began.

David Bharier, head of research at the BCC, said the decision by the central bank was not surprising following the market turmoil caused by September’s mini-Budget.

“The bank has laid down a clear marker that it intends to bring inflation down by placing further pressure on consumer demand," he said.

But Mr Bharier said raising the interest rate was a "very blunt instrument" to control inflation that was largely the result of global factors, including soaring energy costs and supply chain disruption.

“This is further bad news for businesses who find themselves trapped between rising costs of raw materials, energy and borrowing, and weakening consumer demand," he said.

Matt Griffith, director of policy at South West chamber of commerce Business West, which is part of the BCC, added: "The bank has unfortunately found itself in a position of not wanting inflation expectations to become embedded in the º£½ÇÊÓÆµ economy and facing strong pressure from international markets to raise borrowing costs. This is not a great place to be.”

According to recent BCC research, business confidence has been falling over recent months, driven by runaway inflation. The organisation is now calling on the government to set out a long-term plan to stabilise the economy.