The cost of business borrowing is expected to rise this year, according to our poll of SME leaders

13 January 2016

Anyone in the economic predictions game knows the perils of sticking one’s neck out.  

At the start of 2015, the consensus from the global investment banks and fund managers – give or take some variations - was that the FTSE 100 would end the year somewhere around 7,000 points. We all know that it ended at around 6,200 points, although it did briefly peak at 7,100 points in late April.  

This shows that even those with the best resources can only make educated guesses when it comes to the economy and stock markets. 

But that doesn’t mean questions about financial expectations, especially important issues such as the cost of business borrowing, shouldn’t be asked. 

Business leaders’ views dictate their behaviour, so it’s always worth finding out what they think.

Accordingly, towards the end of last year we asked managing directors, finance directors and other board level directors at our clients for their views on potential business interest rates rises this year. We received over 160 responses and I’d like to thank personally everyone who participated.  

From the results of the poll it’s clear that an interest rate rise in early 2016 isn’t on most horizons.

Only six percent of the directors who responded to our survey said they were anticipating a base rate rises this month, and only nearly seven percent from February.

That said, around three quarters were expecting an initial rate rise in the first six months of this year. 

But…a significant minority of around quarter of our clients said rate rises might not occur until August 2016 or even later. 

Despite the expectations of a rate rise, four fifths of our sample haven’t attempted to fix their current their rates with their lenders or banks.  

This is something perhaps they should still consider, because an interest rate rise is on the cards this year, and it’s more likely after the US Federal Reserve raised its base rate in December.

One reason for not fixing rates might be that sixty percent of clients we polled were only expecting interest rates to rise by 0.25% initially, although almost a quarter of respondents said the first rise could be 0.5%, and almost 7% said they were expecting a rise of 1% or more. 

Very positively, 70% of our clients say they are ready to deal with an interest rate rise and they would not be under any financial pressure if there was one. 

For further information, please contact Rakesh Shaunak or your local MHA MacIntyre Hudson advisor.

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