North-East business leaders keen on interest rates freeze

A partnership between The Northern Echo, the North East Chamber of Commerce (NECC), and Tees Valley-based accountancy firm Waltons Clark Whitehill the North East Shadow MPC looks at the region’s economy and gives experts from a variety of sectors the opportunity to argue their case for a shift, or hold, in the rate.

As has been the case for some time, all members voted against further quantitative easing (QE).

Heather O’Driscoll, Managing Partner at chartered accountants and business advisers Waltons Clark Whitehill, called for a hold in interest rates.

She said: “The suggestion that interest rates could rise before the election in 2015, to tackle any inflationary pressures which may arise, gives a strong indication of where the Bank of England’s thinking is, but it is still too early to be considered at the moment. Some sectors are looking more positive, such as engineering and construction, with strong order books, but low margins temper that good news. However, other sectors are making less positive progress, so there is still a need for caution where potential changes to policy are concerned.”

Ross Smith, director of policy at the North East Chamber of Commerce (NECC), agreed with Heather, believing that it is too soon for a rise.

He said: “We’re seeing strong levels of growth and businesses bringing investment plans to the table. However, these have not yet come into fruition, and any changes to monetary policy would discourage this positivity, which is why I feel that a hold is necessary for the time being.”

Rachel Turnbull, chief executive of TT2, operators of the Tyne Tunnels, feels that a rise at this moment in time would affect financing costs for prospective projects in the region.

She said: “Infrastructure and construction can play a major part in driving growth in the North East and there are a number of projects which could be used to significant effect within the region, so I would like to see investment targeted in this area. A rise in interest rates now would increase financing costs for such projects and threaten their viability, so I would like to see the Bank maintain the current base rate.”

Beth Farhat, Regional Secretary for the Northern TUC, also opted for a hold in the current rate, citing that the economy is “finally starting to grow again”, but feels that the North East is suffering from a cost of living crisis.

She said: “The economy is finally growing again but working people are not benefitting. This is not a recovery built to last. The recovery is being driven by rising consumer spending and falling savings. Unless wages start to rise sharply, the recovery could peter out or become dangerously dependent on debt again.

“Research by the Institute for Fiscal Studies (IFS) has shown that it is low hourly rates of pay, not low hours worked that is the main cause of in-work poverty. Introducing a living wage for lowest paid workers is a good start, but 22% of workers across the North East are paid less than the living wage rate and the government should lead by example and give their staff a decent pay rise.”

Graham Robb, senior partner at Recognition PR, who also voted for a hold, believes that we should be reassured by Mark Carney’s recent comments on the North East, and how any rate rise would be considered in terms of unemployment.

He said: “The economy is starting to rise in all parts of the UK, so interest rates should stay where they are for now. I’m reassured by Mark Carney’s comments in The Northern Echo that the effects of any rate rise on the North East would be considered in the context of unemployment.”

Jim Willens, chief executive of Newcastle Building Society, believes that the housing market is in the “early stages of recovering” back to pre-crash levels, and that a rise could scupper this positivity.

He said: “We’re seeing signs of the housing market being more active and housebuilding is also reaching good activity levels. It is not a fragile housing market, but it is in the early stages of recovering to normal levels, and there are a number of positives to build on going forward.

“The Budget was the first in a considerable amount of years that has supported savers, which the market has responded to, so an increase in the interest rate at this point wouldn’t be supportive.”

Catriona Lingwood, chief executive of Constructing Excellence in the North East, feels that although the economy is improving, there is “still uncertainty in the marketplace”.

She said: “The market definitely has more confidence, with more projects now in place, but there is still uncertainty in the marketplace, which is why a hold in the interest rate is best for now. It’s not quite thriving, but there is still plenty of activity.”

Jane Reynolds, Tees Valley Business Manager at North East Finance, expects a rise in the interest rate soon, but feels that it should be held at present.

She said: “I am expecting the interest rate to rise soon, but it shouldn’t be now. The markets have been stable for quite some time, which indicates that the rate could be increased later on. Although people are beginning to feel more confident, I don’t think there is enough confidence for a rise yet.”

Tony Slimmings, managing director at WR Planning Group, feels that as inflation has fallen to below the Bank of England’s target, interest rates should remain as they are.

He said: “I don’t think there are any signs of inflation rising on the horizon, as it has now dropped to below 2%, so there should be no rush to raise the interest rate.”

Andrew Sugden, head of external relations at Northumbria University, also voted in favour of a hold until the economy begins to progress.

He said: “We’ve still got an uncertain recovery, and the economy is still smaller than what it was in 2007, so until confidence is up and there are guarantees, we need to be cautious.”

Ajay Jagota, CEO of www.kis.co.uk, rounded off voting in favour of a hold in the interest rate, believing that there is no need for QE.

He said: “Our economy is still tentative and in terms of housing in the North, we are only at the start of the process of people starting feeling confident again, and about 12 months behind.

“The economic situation that we’re in wouldn’t warrant it (QE), as the economy and employment is moving as a whole, which is very positive news.”