Brutal interest rate rise

Beating your children as a punishment is out of fashion now but the philosophy still pertains in the ranks of our economic navigators. The latest interest rate hike, to 4% by the MPC, is brutal. Does the pound need protection? Now at USA$1.22 to £1, the immediate post Truss/Kwarteng panic of parity seems even more hysterically farfetched now, than it did when the Treasury made its power grab. And taking on a central bank with its own currency was only ever going to produce one winner.

At the root of our inflationary challenges, and those of the western world, lie the Russia-Ukraine war and its effect on food and fuel. They are inescapable essentials: would somebody please explain to me how a Bank of England interest rate hike will impact them?

The only way out of this mire is to encourage growth and investment but a Treasury with a political agenda, or some very old textbooks, is deliberately trampling these areas. Our public debt level is the second lowest of the G7 nations and we must have growth to pay it down.

The last decade has established how rising prices, anywhere, are better controlled by competition, Amazon, the internet, social media, flattening management structures and new entrants like Aldi and Lidl. The messianic cry of high interest rates required to kill off neo-zombie businesses and hailing a brave era of new entrants is loud from the insolvency industry, but it is self-serving and ignores the fact that 50%+ of our GDP come from SMEs which have to battle to pass on price rises.

Sir James Dyson’s opinion of our economic leadership was shared by 66% of respondents on the Bibby SME Barometer. I am with them.

Bob Lefroy, group editor, Business Money