BRC responds to interest rates rise

The British Retail Consortium has responded to the Bank of England putting up interest rates for the first time in ten years by calling on the Chancellor to “deliver a budget for shoppers”.

The Bank of England voted to raise interest rates from 0.25 percent to 0.5 percent and Rachel Lund, head of retail insight and analytics at the British Retail Consortium, called for the Government to “raise its game”.

Lund, said: “While the increase in interest rates is a small and highly anticipated change, this is the opening move in a new phase of economic management, one in which monetary policy shoulders less of the burden of supporting growth, leaving fiscal policy and the Government to raise its game.

“Higher rates in the current environment leave the chancellor some significant risks to prepare for, particularly as far as consumers are concerned. Consumer spending has slowed sharply in the last year as inflation, fuelled by the currency depreciation, has accelerated.”

Lund added: “At the same time wage growth has remained frustratingly weak and consumers have compensated by borrowing, with consumer credit returning to pre-crisis levels. Higher interest rates will only serve to curb borrowing, squeeze household finances - particularly for the less well off, and reduce spending. They will do nothing to increase wage growth.

“So, in an already challenging environment, without action from the chancellor in his budget this month, the risks of a further slowdown in consumer spending have become very real.”

This statement coincided with the British Retail Consortium’s “helping shoppers budget” report targeting the chancellor, which highlights that trend retail sales growth has slowed, profit margins have fallen, while labour costs have risen.

The report shows that retail growth slowed from 2.3 percent in August 2014 to 1.6 percent in the same period this year, and that average retail profit margins have fallen by 1.7 percent since 2014 to 6.5 percent, while adding that the retail industry contributes 7 billion pounds of rates annually.

The British Retail Consortium recommends a number of measures including freezing the business rates multiplier, refraining from increasing income tax rates for a majority of taxpayers and accelerating plans to switch from setting business rates on RPI to CPI.