‘Give us our cut of cheap money’
Nov 11 2008 by Karen McLauchlan, Evening Gazette
A MASSIVE £400bn has now been pumped into the UK banking sector with Prime Minster Gordon Brown and Chancellor Alistair Darling both vowing the injection will help small businesses.
But despite the multi-billion bail-out, Tees Valley firms have yet to see real evidence of support - which would hopefully put pounds back in their pockets.
Last week the Bank of England slashed interest rates by 1.5%, bringing the cost of lending down to 3% - its lowest level since 1955.
But lenders shaken by banking turmoil have been reluctant to pass on cuts in full as interbank lending rates - key in pricing fixed-rate deals - remain high.
The Federation of Small Businesses has welcomed the announcement - which has gone beyond the organisation’s cut calls.
But it added the move will be worth nothing if the cuts are not passed on by the banking sector.
Colin Stratton, FSB regional chairman for the North-east, said: “We called for a bold 1% and this unexpectedly large rate cut will make an enormous difference to small firms in the North-east and will put money in people’s pockets before Christmas.
“The cut amounts to a generous saving for small firms of £750m on loans and overdrafts.
“But all this will come to nothing if the banks do not follow through and pass on the rate cuts to those small firms struggling with increased costs of credit.
“The Federation of Small Businesses is encouraging both banks and local councils to bring in measures supporting small businesses during the economic slowdown.”
John Pettifer, managing director of Recycling IT, in Middlesbrough, said the rate cut could help small businesses - if lenders pass it on.
“Any small business with a loan or overdraft facility could benefit if the cut is passed on - bringing down their costs.
“The reduction in costs could be the difference between surviving and going to the wall for some firms.”
Middlesbrough’s Yvette Sheekey, who runs Penelope’s Pitstops - a garage exclusively aimed at women drivers - welcomed the rate cut which she said could benefit small companies, especially those who had financed their start-up through re-mortgaging of property.
“I remortgaged my home to set up the business,” she said. “As I’m with the Abbey, which has already passed on the rate cut, I’ll be saving around £100 a month - which is great news.”
She added: “If it does help people reduce their mortgage payments, that should mean people have a bit more money - which could help put life back into the economy.”
