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In the ever-shifting landscape of the business world, small enterprises often find themselves riding the waves of economic changes with both determination and trepidation. 

Lately, two significant factors have been making waves of their own: the recent interest-rate hikes by the Bank of England and the business-rate hikes imposed by local councils across the United Kingdom. 

As we delve into this issue, we'll explore the tangible effects these rate hikes have on small businesses, take a closer look at industries feeling the pinch, and discuss potential strategies for weathering the storm.

Interest-rate hikes

The hum of uncertainty has grown louder with the recent interest-rate hikes initiated by the Bank of England. A new high of 5.25% has been announced with the BoE expecting rates to stay elevated for the foreseeable future.

Small businesses, known for their agility and adaptability, are now facing the challenge of navigating this sudden shift. 

Imagine a quaint family-owned fish & chip shop that has managed to flourish in its community for generations. With the rise in interest rates, the cost of borrowing capital to invest in new equipment or expand their product line has increased, casting a shadow over their future plans.

Andrew Crook, the president of the National Federation of Fish Fryers and owner of Skippers of Euxton in Lancashire shared his concerns, saying, 

“We don’t like putting prices up, but unfortunately many businesses have had to in the past year. The longer this goes on, the harder it becomes to absorb it. Without some sort of change, small businesses are just treading water because we don’t have the borrowing power.”

It does at first sound like a bleak period ahead for SMEs needing to tighten the belt. 

However, despite what rete-increases have to do with the price of fish, some economists and business experts take a more positive view of the long-term forecast.  

Laura Suter, Head of personal finance at AJ Bell, has recently said,

‘’It might feel like madness to call peak interest rates when the Bank of England has just raised rates for the 14th time, and the market is still pricing in another couple of hikes from the Bank this year. But for consumers this could be peak interest rates, as banks and building societies have started cutting both savings and mortgage rates.

“Slowing inflation means that interest rates aren’t expected to rise by as much as they previously were – a few months ago we were expecting rates to peak at 6.5% but expectations now are 6% or even 5.75%.’’

Business-rate hikes

As if the interest-rate hikes weren't enough, small businesses across the UK are grappling with another challenge: the recent business-rate hikes imposed by local councils. These hikes vary in severity from region to region, leaving businesses in some areas feeling the weight more than others. In the bustling city of Manchester, local shop owners have seen their rates rise by an average of 12%, causing them to reevaluate their budgets and potentially scale back on hiring or expansion plans.

Other regions have also felt the squeeze, with businesses in London, Birmingham, and Glasgow experiencing significant rate hikes as well. The cumulative effect of these increases has led to a chorus of concerns from small business owners who are struggling to keep their doors open while grappling with rising costs.

One thing that has managed to alleviate some of the burden is the implementation of Small Business Rates Relief  (SBRR). This initiative has been a saving grace for many small businesses, offering them a reduced or even zero-rated business rate if they meet the eligibility criteria. While it certainly provides a much-needed lifeline, more can be done to promote awareness and accessibility of such relief programs.

Solutions to offset the impact

In the face of these rate hikes, small businesses are finding creative ways to offset the impact and remain resilient. Embracing technology and digital solutions, for instance, can streamline operations and reduce overhead costs. This might involve migrating to cloud-based accounting software, adopting e-commerce platforms, or enhancing online marketing efforts to reach a broader customer base.

Collaborative efforts within local business communities can also yield positive results. Establishing co-op purchasing agreements for supplies or negotiating group discounts can help businesses collectively reduce expenses. Furthermore, exploring alternative funding options beyond traditional loans, such as peer-to-peer lending or crowdfunding, could provide a lifeline for businesses seeking capital without being saddled with high-interest rates.


In the current economic climate, the dual impact of interest-rate hikes and business-rate increases has created a challenging environment for small businesses in the UK. As the tides of change continue to roll, entrepreneurs find themselves reevaluating their strategies, seeking innovative solutions, and embracing resilience in the face of adversity.

While the hurdles may seem daunting, it's important to remember that small businesses have a remarkable ability to adapt and thrive, even in the most challenging circumstances. By leveraging available resources, exploring cost-saving measures, and fostering a spirit of collaboration, these businesses can navigate the complexities of rate hikes and emerge stronger than ever before.

As we move forward, it's crucial for policymakers, industry leaders, and communities at large to continue supporting small businesses. By championing initiatives like Small Business Rates Relief and fostering an environment conducive to growth, we can ensure that these entrepreneurial ventures remain the lifeblood of our economy, even amidst the ebb and flow of economic changes.

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James Waller
Content Specialist
Updated on
August 14, 2023

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