Bank of England announces historic interest rate cut on budget day

Amid growing concerns about the scale of disruption expected because of the coronavirus, the Bank of England has today announced an emergency cut in interest rates.

Why has the cut been made?

The decision by policymakers to reduce rates from 0.75% to 0.25% was not only taken to lessen the cost of borrowing to historically low levels, but also to generate billions of pounds to support firms.

Mark Carney, who’s tenure as governor for the Bank of England ends on 15 March 2020, says that the bank’s role should be to “help UK businesses and households manage through an economic shock that could prove large and sharp, but should be temporary”.

This interest cut comes as part of a group of changes aiming to support the economy. The reductions come in conjunction with a new £100bn scheme to ensure that small and medium sized business, as well as households, benefit from the cut. The Bank of England has also promised other changes intended to free up a further £190bn for lending.

Who will this affect?

The key focus of these changes is clearly to improve the cashflow of small to medium sized businesses, which have the potential to be damaged by staff absences and an increasing strain on trade. By freeing up funds to help support some of these entities, the hope is to avoid lasting scars on the economy by willingly confronting the temporary shock caused by the unpredictable coronavirus.

Get in touch

It can be a daunting prospect to identify the budget items that might affect you. If you are concerned for your business or need help understanding any of the changes, please email misty@griffinaccountancy.co.uk or call 01392 241228.

On Thursday 19 March, the Bank of England cut the interest rate further from 0.25% to 0.1% to allow additional funding to support the economy.