Interest rates have been raised by the Bank of England for the first time since 2007. Seven of the Monetary Policy Committee members voted for a rate increase, and the official bank rate was raised from 0.25 per cent to 0.50 per cent.
CBI Chief Economist Rain Newton-Smith said: “While it’s the first rate rise in over a decade, it is only taking the rate back to the level seen in August 2016 and at 0.5% it remains near rock bottom.”
People with mortgages will not be happy about the increase, but for small builders, the rate increase could have a silver lining. Many small companies have problems with late payments, and this increase could help them chase payments across their supply chains.
National Federation of Builders Chief Executive Richard Beresford said: “The interest rate rise will give SMEs more leverage when chasing late payments, but there is still some way to go.”
However, for companies that are struggling to stay afloat and are only kept alive by access to cheap credit, it could spell the end. There is also some concern that construction jobs could be affected by a rate rise if businesses are not robust enough.
Under the Late Payment of Commercial Debts Regulations of 2013, businesses that are owed payments are permitted to charge interest at 8 per cent of the amount owed plus the Bank of England’s base rate.
It was revealed in a report released in August that almost two-thirds of SMEs are not being paid by their public sector clients within 30 days.