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Bank must avoid 'hasty' interest rise
6:01am Tuesday 8th July 2014 in Business
THE Bank of England should avoid lifting interest rates amid slowing UK economic growth, a leading business group has warned.
The British Chambers of Commerce (BCC) says the services and manufacturing industries have eased after a surge earlier in the year.
Bosses say figures show exports and orders in services slipped from all-time highs in the first quarter, with manufacturers failing to hit similar peaks.
They added both sectors showed declines in exports and investment growth, though they still sit above pre-recession levels in 2007.
Bank of England Governor Mark Carney previously told The Northern Echo interest rates could rise ahead of the next General Election.
John Longworth, BCC director general, revealed a poll of 7,000 firms showed the recovery was moving forward.
He said a modest decline in investment and exports was not surprising after they "jolted forward" in the first quarter.
However, he warned a "broken business finance system" constraining firms' access to funds must be fixed, adding an early interest rate rise would drive up the cost of businesses' credit.
He said: "These results reinforce the case against the Bank making any hasty decisions on raising interest rates in the very short-term.
"We must nurture the business confidence we are seeing at present by giving firms the security of working in a low interest rate environment for the foreseeable future - with eventual rises both moderate and predictable.
"At this crucial stage of the economic cycle, the UK cannot afford populist decision-making that undermines strategic long-term decisions as this could jeopardise our national success in the years to come."
Speaking exclusively to The Northern Echo earlier this year, Mr Carney failed to rule out an interest rate rise, but said he wanted to see more North-East jobs created before he would intervene.
He also moved to reassure householders and businesses he wants the region to reap more benefit from the London-led recovery.
He said: "We are one year into a recovery, but it is an uneven recovery.
"This is not about getting back to where we were in 2008, our aspirations are much higher.
"We have been as explicit as we can about the nature of adjustments to interest rates, but we can't be specific.
"However, we are absolutely clear it will happen independent of the political cycle.
"When you raise interest rates it is a welcome sign, though I'm not sure we'll get a lot of cards to thank us."
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