Smaller businesses will be boosted by interest cut

The Bank of England's decision to cut interest rates from 5% to 4.5%. The FPB believes that slashing the cost of borrowing will significantly boost the confidence of the owners of small businesses suffering because of the economic downturn. The move, which follows a similar cut by the Federal Reserve in the US, the European Central Bank and several other European banks, is likely to benefit independent retailers, which have been hit by spiralling costs and falling sales. It could also encourage more businesses to seek investment from both traditional financial institutions, such as banks, and alternative sources of finance, such as asset-based and invoice finance. The FPB's Director of Finance, Nick Palin: "Cutting interest rates will have been a difficult decision to make, but the FPB believes it is the correct one. With many analysts predicting that the UK is already in a recession, or very close to one, this decision should boost the market and hopefully will inject some confidence in to it." The coming months are especially crucial for smaller retailers, which rely on strong trade now and in the run-up to the busy Christmas period. By cutting the main lending rate by half a percentage point, the Bank of England's Monetary Policy Committee has reassured owners of small businesses that their concerns are finally being addressed. The cut will also be welcomed by smaller businesses looking to borrow to invest, and those which have variable loans, because it will mean a reduction in their repayments.