North East Shadow MPC opts for caution to keep rates at 0.5 per cent

The committee returned a ten-one verdict in favour of the hold, with members wanting further economic stability before a rate rise, despite the recent encouraging GDP figures, which revealed growth of 0.7 per cent in the second quarter of the year, and speculation there could be a split vote among MPC officials for the first time this year.

North East Shadow MPC members also voted against any further Quantitative Easing (QE).

A partnership between The Northern Echo, V&A Vigar & Co (Darlington) LLP and the North East Chamber of Commerce (NECC), the 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.

Amanda Vigar, managing partner at V&A Vigar & Co, started off voting in favour of a hold to allow time for economic stability following the Chancellor’s Budget.

She said: “While the ONS revealed positive growth figures for the second quarter of the year, there is still a lot of uncertainty in the economy with low inflation and problems in the Eurozone still rife.

"The implications from the recent Budget will have an effect on the economic landscape and especially small businesses, which contribute so much to the economy, so we need to be cautious and wait and see what impact this will have before shifting the interest rate.”

Ross Smith, director of policy at the NECC, also feels that more stability is needed, especially in terms of exports, before a rate rise.

He said: “Although the economy is strengthening, our most recent survey showed that there is still a lot of pressure on exporters because of the strength of the pound.

"We need to see more stability before a rise is even considered.”

However, Angela Russell, finance director and deputy chief executive at Newcastle Building Society, believes now is the time to start slowly increasing the interest rate.

She said: “A slow, steady increase would be a welcome reprieve for savers who have suffered from record low interest rates for the past eight years.

"It is clear that the UK economy is on the path to recovery, especially with the promising GDP figures, and a modest rise wouldn’t impact too heavily on the economy and with mortgage customers, who are already subjected to rigorous lending checks as it is.”

On the contrary, Geoff Hogg, managing director of JR Property Developments, believes the economy would struggle to withstand a rate rise.

He said: “We have benefited from low interest rates for quite some time, which has allowed long-term projects to come to fruition and enhanced local economies with job creation and investments.

"There is still some way to go before the country can withstand a rise in interest rates, but there is still plenty of positivity in the economy buoyed by promising growth figures.”

Jonathan Willett, a director at Henderson Insurance Brokers Teesside office, also feels the UK economy needs more stability before a rise.

He said: “It was pleasing to see the economy grow in the second quarter of the year after a slowdown in the first three months of the year, together with a continued rise in consumer confidence.

"That being said, the country needs more stability before we are in a position to normalise interest rates from their record low levels.”

Jason Maguire, managing director of The CreateCity Group, believes the economy is still delicate and a rise would impact on exports.

Mr Maguire said: “The economy is in a stronger position than what it was but is equally as delicate and I fear that a rise would have a negative impact on currency and cause further export issues.

"The time will come for a rise, but at the moment, we need to act cautiously and keep interest rates where they are.”

Richard Hogg, a director at Jackson Hogg Recruitment, believes that the current rate is helping to drive growth in some of the economy’s key sectors.

He said: “I am seeing amongst my clients in the manufacturing and energy sectors, that there is a growing confidence which is allowing for investments in both equipment and infrastructure.

"This returned confidence is driving growth and the recent GDP figures are very promising, so a hold, for now, would be a safe bet.”

Anne Elliott, chief executive director at Latimer Hinks Solicitors, who also opted for a hold, feels the tax changes announced in the Budget will affect consumers.

"Although an interest rate increase is in prospect, I would prefer to keep it at its current level for as long as possible.

"The tax changes announced in the Budget are going to affect disposable income, which, itself, will affect consumer confidence and I feel that overall this is still fragile.”

David Coates, regional managing director at Newsquest Yorkshire and North East, which publishes The Northern Echo, believes the North-East, unlike other areas in the UK, is still fragile and the economic recovery is still weak.

He said: “While other areas of the country are doing better, the North-East is still not out of the woods.

"House prices in our region are still not growing and the economy is still very fragile.

"An increase in interest rates is likely to undermine confidence in a recovery that still hasn’t really got going.”

Mark Marsh, finance director at Seaward Group, believes that despite positive growth figures, the economy is still relatively weak.

“There is still not sufficient evidence that the UK economy has long-term traction and longevity in jobs.

"Whilst growth is good, the claimant count in June was slightly worse than expected, and manufacturing and construction are still weak.

"The changes to the minimum wage will also get companies really thinking about efficiencies as opposed to hiring to pay for this cost.”

Hirohito Imakoji, managing director at Liebherr-Sunderland Works Ltd, rounded off the voting in favour of a hold until the wage increases, following the Budget, are felt across the board.

He added: “Inflation is still at zero per cent which is far away from where it needs to be.

"Even though the economic outlook is more optimistic, with the possibility of a rate rise towards the end of the year, the wage increases that people have gained aren’t fully reflected yet, so until that happens I would keep interest rates where they are.”