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North East Shadow MPC Delivers Majority Verdict To Hold Interest Rates For June


The North East Shadow Monetary Policy Committee (MPC) has delivered a majority verdict to maintain the current rate of interest, in line with the Bank of England's own MPC announcement. 

North East Shadow MPC Vote to Hold Interest Rates in JuneThe North East Shadow Monetary Policy Committee (MPC) has delivered a majority verdict to maintain the current rate of interest, in line with the Bank of England's own MPC announcement. 
A partnership between the North East Chamber of Commerce, the Institute of Chartered Accountants England and Wales (ICAEW) and The Northern Echo, the North East Shadow MPC looks at the region's economy and gives experts from a variety of sectors the opportunity to argue their case for a shift, or hold, in the rate.

The lack of recovery in the economy and the continuing challenges facing the eurozone have led to a general consensus among members that interest rates should be held at their current level to help facilitate growth in UK markets.

However, a couple of members believe that a shift in the current rate of interest is necessary.

John Elliott, Trustee of the Ebac Foundation, said:

"Interest rates should be a reasonable figure for savers and borrowers circa 5%. The Treasury and the Bank of England should stop fooling themselves, believing they can solve the structural problems in our economy by ridiculously low interest rates. Our economy won't fulfil its potential by adjustments; it needs a radical change."

David Coates, Managing Director of Newsquest North East, believes that interest rates should fall and there should be another bout of quantitative easing to help stabilise the economy. He said:

"The continuing Euro crisis means there is now a compelling case for a further rate reduction and stimulus from the Bank of England. The changing political environment in Europe has the potential to destabilise an already uneasy situation meaning that policymakers need to act quickly to calm the markets. I believe that we're in a situation which will require various levels of intervention from the bank for years before things start to normalise."

He added:

"With reference to our business, our revenues are not really growing yet, but they appear to have stopped getting worse!"

Keith Proudfoot, Northern Regional Director of ICAEW, led the majority decision to call for a hold. He commented:

"While IMF suggested that dropping interest rates will stimulate the economy, I don't think they can go any lower. We actually need a third lever beyond interest rates and quantitative easing to kick-start the economy."

"Our recent ICAEW survey suggested that our members in the region are quite confident about the future and there are strong forecasts for growth in terms of factors such as exports. On the other hand, we are concerned that businesses are not investing and when they don't invest, it portrays a lack of confidence. To encourage and increase confidence in our economy, I'd like to see some tax incentives, such as greater capital allowances, to help stimulate investment, and as such, growth of businesses and the economy."

Ross Smith, Director of Policy at the North East Chamber of Commerce, agrees. He said:

"We've seen a drop in inflation due to short term factors, which means that inflation probably won't continue to fall as quickly as it has been. Nevertheless, there hasn't been great pressure on inflation from wages in the North East so the inflation we have seen is mainly imported which won't be affected by a change in interest rates."

He added:

"I think business confidence in the North East has been good recently, but overall there is still an underlying uncertainty. A change in interest rates could damage what confidence there is at the moment."

Ian Brown, Director of Fresh Element and Owner of P & H Energy UK Ltd, said:

"Trading is increasing in Fresh Element due to the opening of a new Garden Kitchen. Renewables are also very exciting at the moment as biomass boiler sales are increasing due to the Government Renewable Heating Incentive and now that interest in PV panels is falling, biomass is seen to be the next big area for investment. However, more generally, a malaise exists and people are hurting in terms of personal spending and sales. I believe that the government should take the opportunity while interest rates are low to build houses and roads."

Jim Willens, Chief Executive of Newcastle Building Society, agrees with the majority. He said:

"A lack of recovery and growth in the UK economy and uncertainty over the Euro zone are the main factors as to why I support no change to both the base rate and the current level of quantitative easing."

Kevin Rowan, Regional Secretary of the Trades Union Congress (TUC), believes that interest rates should be held due to the unstable nature of the economy. He said:

"At present, we have pretty much the same picture economically that we've had for the past six months. This is a lack of growth in the economy and business confidence, and people are anxious about their income and job security. Consequently, the argument for economic stimulus continues."

Nigel Mills, Managing Director of property investors Closewalk Ltd, commented: "Interest rates should be maintained at their current level as the economy is slow at present."

Graham Robb, Senior Partner at Darlington-based Recognition PR, agrees. He said: "We should hold the interest rates at the moment as we can not ignore the fact that our economy is in recession. However, I would not want to see more money spent on quantitative easing this month as inflation is heading in the right direction and we do not want to jeopardise this."

Catriona Lingwood, Chief Executive of Constructing Excellence in the North East, believes that interest rates should be held due to her observations of the construction sector. She said:

"Looking at recent figures released, the most significant fall is the 4.8% drop in construction output for the first quarter of 2012. The best way to kick-start the economy is to put money into the construction sector. The government is doing this with the green deal and public housing development, but these are happening at the back end of this year or in 2013 and need to be put in place more quickly than planned. An increase in interest rates could jeopardise many projects going ahead."

David Bowles OBE, Chairman, Northern Defence Industry, said:

"I believe there should be no change to the current level of interest rates. Business confidence is not good at the moment, despite reports to the contrary. What we need is investment in infrastructure to promote growth and invigorate the supply chain and we also need to invest heavily in export measures to encourage SME's to explore and secure orders from overseas."

David added:

"I am not in favour of another round of quantitative easing which I believe simply serves to devalue the currency and strengthen clearing the bank's balance sheets without creating any impact on the industrial or consumer economy."

Michael O'Connell, Director of EOS, agrees with the majority. He said:

"Interest rates should stay as they are. The government has announced that we're in a double dip recession, whether this is true, I'm not sure. Nevertheless, the economy is still tight and people are still struggling to find work; the job numbers don't show this changing for some time."