Midland bosses say interest cut is not enough

Feb 6 2009 by Andy Richards, Birmingham Mail

WEST Midland business leaders doubt whether the Bank of England’s half-point cut, lowering its Bank Rate to one per cent will have have any meaningful impact.

Some commentators, but not all, urged the Bank and the Government to press ahead with fast-acting “quantitative easing” to inject money directly into the economy speedily before the recession becomes more deeply entrenched. Others were nervous of the longer-terms consequences of a drastic and untried policy.

Ronnie Bowker, Ernst & Young’s senior partner in Birmingham, said “Successive interest rate cuts do not appear to be making a great deal of progress.

“Lack of confidence and the impact it has on the economy should not be underestimated.

“A manufacturer is not going to invest in capital equipment if orders could potentially dry up.

“Similarly, consumers, although they may have more cash in their pockets from the reduced interest rates and VAT cuts, are not confident enough to spend and are saving the extra cash for a rainy day.

Richard Brennan, chief executive of Birmingham Forward, agreed that yesterday’s cut will have no real impact. He added, “This week’s Automotive Summit demonstrated that what business wants to see is a speedy delivery on the financial support packages announced by the Government.”

Mark Smith, chairman of PricewaterhouseCoopers in the Midlands, welcomed the cut, but added: “Interest rate changes typically take 12 months to fully impact and therefore other ‘unconventional’ methods such as credit easing, are required.”

John Kelly, senior partner in Birmingham of the corporate recovery specialists Begbies Traynor, dismissed recent rate cuts as a waste of time.