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Borrowing costs for small businesses set to fall

The Bank of England has this week taken steps to minimise the economic fallout from the UK’s Brexit vote – and small businesses could see borrowing costs fall as a result.

Governor Mark Carney has announced that capital requirements on Britain’s banks are to be relaxed immediately so they can boost lending levels to consumers and businesses by as much as £150 billion. The Bank said the change in policy was necessary to boost confidence that had been shaken by the decision to quit the European Union in June’s referendum.

However, Carney said that the preparations made by the Bank in the run-up to the referendum had had the desired effect so far. “Financial markets are doing their job. They are adjusting to this change. They have functioned pretty well,” Carney said.

Ben Brettell at investment firm Hargreaves Lansdown said: “Mark Carney certainly painted a gloomy picture, citing growing evidence that firms are delaying investment decisions, and the UK’s current account deficit as major problems. Nevertheless, he was keen to provide assurances that the financial system was ‘doing its job’.”

Dip in confidence

Meanwhile, a new survey published by the Centre for Economics and Business Research has found that confidence among UK businesses dipped sharply in the wake of the referendum. The study showed that the share of companies that are pessimistic about the country’s economic outlook increased from 25% to 49% in the week following the vote.

Spokesman Scott Corfe said:

“These figures show what is happening on the ground and they suggest a significant shock reaction.

Not only are businesses feeling much more pessimistic in general about the state of the economy, but their own expectations for domestic sales, exports and investments over the next 12 months have gone off a cliff. Hopefully this is a short-term panic reaction and confidence will edge up again once the dust settles.”

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