Rate rise alarms NI businesses

Business leaders in Northern Ireland reacted with dismay to the latest British interest rate increase.

While sterling has been falling over the past two days, the consensus was that the rates rise would compound problems caused by the recent strength of sterling.

The increase of 0.25 per cent announced on Thursday, the fourth in as many months, brings the rate to seven per cent, a full percentage point higher than at the time of the British general election.

Mr Bill Tosh, Confederation of British Industry chairman in Northern Ireland, said the rise was very disappointing. "This is yet another signal that Mr Gordon Brown should have done something in the budget to take the heat out of consumer spending, by way of personal tax or VAT adjustments."

He said the interest rate increases were proving "a significant load on businesses", and would not help deliver the much-needed exchange rate readjustment.

The fall in sterling over the past two days was not nearly enough, according to Mr Gerry Conway, of Powerscreen, one of the North's most successful companies.

"We would need a swing of up to 10 per cent," he said. The impact of the interest rate rise would be small in comparison with the exchange rate, which was "really hurting our European margins". The uncertainty of the situation was a major problem for companies like Powerscreen, where exports account for the vast majority of business, he said.

Europa Hotel manager, Mr John Toner, said it was too soon to assess the effects of the rate increase on the tourism industry.

"I don't know what will happen if it continues, but it has come at a time when the mood is optimistic after the ceasefire."

He said the strength of sterling was more of an issue within the sector.

Mr Alan McClure, chairman of the Institute of Directors in the North, said there were indications that the economy was improving and he hoped this would lessen the impact of the interest rate rise.

The Federation of Small Businesses said the rise would cost its members across the UK another £50 million sterling in interest payments.