This is an abbreviated article by Liz Barclay – read the full article at Business111.com/news
Britain’s economy has unexpectedly grown by 0.4% in July. Great news. Except stronger growth could make the Bank of England more willing to put interest rates up, with some City economists reportedly predicting as many as four increases over the next year. For small businesses already struggling with borrowing costs, that would put a rather large sting in the tail of Britain’s recovery.
GOOD NEWS – WITH A CATCH
Services grew 0.4%, with computer programming, AI-related businesses and the digital economy helping drive the increase. Production rose 0.2% and construction 0.1%. After months of gloomy economic news, the Government finally has something to celebrate. But small businesses need to know what happens next. If stronger growth contributes to higher interest rates, businesses using overdrafts, loans, credit cards and commercial mortgages face another increase in costs.
Consumers could be squeezed too. Higher mortgage and borrowing costs leave households with less disposable income, potentially reducing spending in shops, restaurants and local businesses.
Small firms get hit from both directions.
WHERE’S THE GROWTH?
There’s another issue. Growth concentrated in AI, programming and the digital economy doesn’t necessarily mean the independent retailer, café or small manufacturer is experiencing a boom. Small businesses need growth that reaches high streets and local economies. They are still dealing with expensive energy, wages, insurance, rent and weak consumer confidence. Major employers are also cutting jobs, with the consequences spreading into supply chains and local communities. So one month’s GDP figures don’t suddenly make those problems disappear.
DON’T WASTE IT
The Chancellor has put growth at the centre of his economic strategy. July’s surprise gives him an opportunity. Small businesses need lower employer costs, better access to finance, stable taxes, support with energy and investment that strengthens local economies.
What they don’t need is another round of higher borrowing costs. The economy growing by 0.4% is unquestionably good news. But if it is followed by several interest-rate rises, small businesses may reasonably wonder when they’re supposed to start feeling the benefit.
Britain needs growth that reaches the high street, household pockets and the businesses employing local people. Otherwise July’s surprise could prove to be exactly that – one surprisingly good month rather than the beginning of a real recovery.
This is an abbreviated article by Liz Barclay – read the full article at Business111.com/news
If you are a small business, self employed or freelance -register to get free 24/7 help for your business – @business111com 
Discover more from PeopleMatter.TV
Subscribe to get the latest posts sent to your email.