IPSE cautiously welcomes interest rate rise

IPSE, the Association of Independent Professionals and the Self Employed, has responded to the Bank of England’s decision to raise interest rates for the first time since 2007.

The decision came after inflation hit 3.0 per cent for Q3 of the year. In response, the Monetary Policy Committee voted 7-2 in favour of raising interest rates by 0.25 per cent – a reversal of the reduction in the immediate aftermath of the EU referendum in 2016.

The Bank of England has indicated that this is not the start of a series of rises. Inflation is now expected to peak at around 3.1 per cent and then start to fall towards the Bank of England’s target of 2 per cent.

Tom Purvis, IPSE’s Economic Policy Advisor, commented: “In some ways the rise in the interest rate may help self-employed people, but in other ways it may lead to difficulties. On one hand, the rise should lead to a strengthening of the pound. This will reduce costs for self-employed people who import resources such as software. However, it will also lead to an increase in the cost of borrowing, which may prevent some people from entering self-employment as the cost of business loans and mortgages rises.

“To combat these possible negative effects, the Government should avoid any changes that will do further damage to people who choose to work for themselves. At a time when low productivity is causing problems for the UK economy, the Government must do more to support the self-employed and ensure they can use their invaluable expertise to improve productivity for businesses across the country.

“The Bank of England needs to continue to provide ample guidance about their economic forecasts. With confidence in the UK wavering, the self-employed must be reassured about inflation, exchange rates and economic growth. With this reassurance, they will be able to make informed investment choices that will benefit the UK economy”.

 

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