'Hold interest rates', says North-East Shadow MPC

However, one member believes a rise would pay dividends to savers who haven’t benefited from the Bank of England’s 0.5 per cent rate.

A partnership between The Northern Echo, 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.

Its latest meeting saw two new members join the panel with Darlington Building Society’s chief executive, Colin Fyfe, and Mark Marsh, finance director at Seaward, offering their opinions on the state of the economy.

In a heated discussion, which focused on the housing market, employment and inflation, all members voted in favour of no further stimulus to the economy through Quantitative Easing (QE).

However, some members believe it is about time to start planning for a reduction in QE.

Heather O’Driscoll, managing director of Waltons Clark Whitehill and chair of the committee, believes it is too soon for a rise in interest rates, especially for some small and medium-sized businesses with auto enrolment being factored into businesses in the coming years.

She said: “The committee has voted to keep interest rates the same, despite there being a lot of discussion surrounding the housing market and mortgages, as well as the skills gap in some businesses.

“Some businesses aren’t ready for a rise in the interest rate, especially with auto enrolment being introduced to SMEs, which is a concern for some people who don’t know whether to opt in or out.”

Ross Smith, NECC director of policy, has been seeing a lot of positivity among member businesses, but argued that there was no case for a rise yet, as inflation is still lower than the Bank of England’s target of two per cent.

He said: “The fundamental remit for interest rates is about inflation and there is no imminent rise on the horizon, so why increase the rate and put more pressure on the economy?”

Mr Smith also raised the question about the skills gap in some industries, supported by Ms O’Driscoll and Anne Elliott, marketing partner at Latimer Hinks Solicitors, which is hampering the economy and is leaving businesses unable to fill vacant spaces.

However, Graham Robb, senior partner and founder of Recognition PR, was the only member to suggest a rise in the interest rate to support savers.

He said: “Lenders are anticipating a rate hike that hasn’t happened, so savers are suffering, so we might as well get the uncertainty out the way and have a rise.

“Employment is stable and there is plenty to be positive about the economy with only the negatives driven around the expectation of a rise.”

Mr Fyfe is seeing good signs in the housing market and believes that the media is over-exaggerating its state, which was supported by fellow member, Ajay Jagota, chief executive of lettings firm KIS.

Mr Fyfe said: “The Mortgage Market Review (MMR) has helped take the heat out of the housing market, which has been exaggerated in the media with some contradictory statistics.

“The further south you go, the more heat in the market, but, regionally, the North-East has picked up and is catching up with earlier progress from other regions.”

He also warned the expected interest rate rise shouldn’t be ignored and that people need to know how it will affect them, as most consumers wouldn’t have experienced it before.

Ms Elliott raised concern about the effect a rise would have on towns.

She said: “Looking at the retail sector, there are a lot of empty shops and an increase in charity shops on our high streets, with some high end brands struggling.”

Mrs Elliott also believes there could be a rise in the interest rate by the end of the year and that an upsurge in insolvency is a concern, despite there being a lot of activity in commercial property and people finding finance.

Mr Jagota, who also opted for a hold, feels that the economy is still very much a ‘South-centric’ and consumer-led recovery and that the North East needs some momentum.

He said: “Measures such as Help-to-Buy have had a positive effect on activity in the market and has created jobs in construction and more people are spending in local economies.

“It’s hard for the North-East to get its point across as its impact to the economy is less than in the South, even though the region’s economy has returned to pre-crisis levels.

“A 0.5 per cent rise would make a difference to peoples’ disposable income and affordability, especially those in negative equity and on low incomes.”

Mark Marsh, from Seaward, rounded off voting in favour of a hold, after experiencing a ‘summer slowdown’ in the market.

He said: “We have experienced a buoyant period in the 14 months to June, but there is a lot of uncertainty in the market.

“Interest rates have affected the exchange rate, which has impacted on exports.

“People have to understand that businesses have grown off strong exports and a bit of caution is needed if the previous fast pace is to continue.”