WITH a rise in the interest rate of 0.5 per cent being a hot topic of conversation, North-East business leaders have unanimously voted in favour of a hold warning that it would be too soon for a rise at this stage.
The North East Shadow Monetary Policy Committee (MPC) returned a unanimous vote in favour of keeping the interest rate as it is, which would allow for more growth in the economy and, in particular, in the North-East. Members were also against any further quantitative easing (QE).
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.
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Heather O’Driscoll, managing partner at chartered accountants and business advisers Waltons Clark Whitehill, started off the voting in favour of holding the current interest rate, as she called for caution.
She said: "It seems inevitable that the time when interest rates will rise is drawing nearer, but when the decision is being made I would urge caution and a broad view, which encompasses the whole of the UK, rather than simply addressing a regional issue in London and the South-East.
"There is still a need to ensure that the growth we are seeing in the economy is maintained and nurtured and any policy decisions should take this into account, and I believe that this month is too soon to be increasing rates.”
Ross Smith, director of policy at the North East Chamber of Commerce, echoed Heather's view as he feels that inflation is still too low and a rise could deter the impact that exports have on the economy.
He said: "Inflation is still below the 2.0 per cent target, so there is no urgent need to raise the current rate.
"We're beginning to see strength in the pound and in the economy as a whole, and a rise would have the potential to cause problems for exporters, which is so important to the economy and the North-East."
Colin Fyfe, chief executive of Darlington Building Society, believes that, although the economy is in a good position, the Bank of England’s Financial Policy Committee’s recently introduced measures to calm the housing boom should be given a chance before a rise.
“We will undoubtedly see a rise, and the timescale we’re thinking of is in the first quarter of 2015, but at this time I would like to see the rate held at 0.5 per cent.
"I don’t believe it is the right time as inflation is still falling together with unemployment, so we don’t want to negatively impact these measures.
“The way the economy is moving at present is positive, but the main threat is the housing market as house price rises are a concern, but they are not consistent with the rest of the UK.
"The recent measures introduced by the Bank of England’s Financial Policy Committee aim to address this, and I would like to see these given time before a change in monetary policy.”
Rachel Turnbull, chief executive of TT2, also opted for a hold believing that the current house price boom, which has been a main factor in the call for interest rates to rise, is only being felt in the South and that there needs to be consistency.
She said: "There has been a lot of talk about rising house prices leading to a change in interest rates, but the increases have been significantly greater in the south than elsewhere in the country.
"While infrastructure and construction still require low interest rates to kick start projects, there needs to be consistency at present to generate the finances in order to make them happen.
"The economic recovery is still in its infancy and fluctuations too soon could stifle recovery, so I would call for a hold in interest rates at this time.”
Anne Elliott, partner at Latimer Hinks Solicitors, believes that a rise in the interest rate would not be beneficial at present as the economy continues its recovery.
She said: “The economy is beginning to turn a corner and continues growing, so I believe the current level of interest rate needs to stay the same. An increase would only hinder the positivity that has been felt throughout the country, and low rates will continue to aid the economic recovery.”
Nigel Mills, chairman of the Entrepreneurs' Forum, also voted in favour of a rise as he believes that a rise would reset the UK's growing economy.
He said: "Interest rates in the UK need to be kept at the current rate because rates across the world are still below where they should be. Any further stimulus, at this stage, would affect our strengthened economy, which could potentially reset all of the progress that has been made."
Ajay Jagota, chief executive of kis.co.uk, feels that a rise in the current rate would affect households with mortgages and that household incomes need to increase first.
He said: "In terms of mortgage payments, there are a lot of affordability issues at present and a lot of households are feeling the strain. I believe that we're close to a rise, but household incomes need to increase before this happens. A rise at this moment in time would send the wrong message to these people."
Tony Slimmings, managing director of WR Planning Group, also called for hold because of the current low rate of inflation.
He said: "Inflation is still at the pitiful level of 1.5 per cent, which is 0.5 per cent off the 2.0 per cent target when a change in the interest rate is to be discussed, so I see no reason to raise the current rate until this target is met."
Andrew Sugden, head of external communications at Northumbria University, believes that the economic recovery needs to be spread across the whole country before a rise.
He said: "The economic recovery is still being felt strongly in the South and is very much 'London-centric'.
"The North-East needs to experience more of this positivity and the recovery needs to be spread evenly before a change.
"More jobs need to be created, and any rise would affect this."