A further blow has been dealt to manufacturers today as the Bank of England resisted calls to slash interest rates to bolster the UK economy.
In the face of growing pressure to slash interest rates, despite already being at a historic low, the Bank of England has opted to keep interest rates at 0.5 per cent.
The Bank’s Monetary Policy Committee (MPC) announced the decision after a two-day meeting.
It confirmed existing plans to increase quantitative easing by £50bn, bringing the amount of government bonds purchased to £375bn as it hopes boost the level of available credit.
Economists had predicted that the MPC could cut interest rates, which would have resulted in the UK’s lowest rates of all time.
The news comes as a further blow to manufacturers, which have suffered from a fall in orders from the euro zone and rising input costs, a combination that led to a 0.7% decline in output between April and June.
Figures revealed that output dropped to its lowest level for three years yesterday.
Small and medium-sized manufacturers commented that lower interest rates would have encouraged spending at a time when companies lack the confidence to spend.
Chris Mulvihill, operations director at Kent-based fire alarm manufacturer EMS Systems, said: “We are disappointed with the news. A cut in interest rates would have helped our customers push their business which helps us as manufacturers.”
“As we now look set to enter an unprecedented triple-dip recession, the Bank of England should have done something to improve business confidence,” added Mr Mulvihill. “Pushing rates back down would have allowed us to at least try and ride against the storm.”
Ms Lee Hopley, chief economist at the manufacturers’ organisation EEF, predicted that action will need to be taken over the coming quarter. “Concerns about the economy haven’t eased up over the past few months and there are now question marks over whether we will see a bounce back in the near future,” she said. “This could produce a further bias towards monetary loosening later in the year.”
A further boost to quantitative easing is expected at the next MPC meeting in November, with the Government continuing with its current strategy and resisting any suggestion of a ‘plan B’ as the British economy continues to stagnate.