You want advisors who are positive and proactive. Unfortunately, sometimes, there is no magic wand and our role is simply to point out the bad news that is coming so that businesses can do their best to be prepared. Maybe the forecasters are over reacting, but experience suggests otherwise. You will find some positive suggestions below, but they may be like putting up an umbrella in a hurricane!
There are three issues of concern to flag up…
Interest rates
Energy costs
Wage costs
Let’s look at these in turn, and also consider what inflation and rising costs do for the Economy:
Interest Rates
There are two parts to borrowing rates. Firstly the underlying base rate set by the Bank of England (BOE), and then the ‘margin’ applied by the lender you are borrowing from.
The highest base rate in the UK was 17.00% in November 1979, and the lowest rate 0.10% in March 2020. Consider that for a moment. The BOE base rate at its peak was 170 times the level at its lowest.
Anyone under 50 may not remember double digit interest rates. Expectations are that the base rate could be 4% or 5% by early 2023 and as high as 7% by the middle of that year. Lenders are also likely to increase their margin, so we could well see rates above 10% once more.
Watch our video of Director Peter Hill discussing further details on the topic of Interest Rates.