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North East Shadow MPC Disagrees on Interest Rates

 

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

North East Shadow Monetary Policy CommitteeThe North East Shadow Monetary Policy Committee (MPC) has delivered a majority verdict to maintain the current rate of interest, ahead of the Bank of England's own MPC announcement on Thursday.

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 announcement that the UK is officially in a double-dip recession has caused a great deal of concern among members. The general consensus is that interest rates should be held at their current level to help stimulate the economy and facilitate growth in UK markets.

However, one member, John Elliott, Trustee of the Ebac Foundation, believes a rise is necessary. He said:

"We need to raise the interest rates to a level which is fair, and of benefit to savers and borrowers alike, which is around 3.5 to 4 per cent."

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

"Interest rates should be maintained at their current level. At the moment, businesses are struggling, VAT is starting to cause problems and cash flow is still an issue."

Ross Smith, Director of Policy at the North East Chamber of Commerce, also believes that interest rates should be held. He commented:

"There is a difficult balance to be struck with inflation still above the Bank of England's target. With the UK officially back in recession, increasing interest rates would be a danger to growth."

Anne Elliott, Partner at Latimer Hinks Solicitors, agrees. She commented:

"Interest rates should stay the same. Media coverage of the fact that we are in a double dip recession is causing a great deal of concern."

Graham Robb, Senior Partner at Darlington-based Recognition PR, also believes that interest rates should be held. He said:

"Although I am not convinced that the economy is in recession, statistics say that it is. It would therefore be foolish to change the rates at the moment."

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

He commented:

"Clearly the GDP figures last week was disappointing news for the economy and that hasn't helped with business confidence. While a couple of sectors, the oil and gas and the automotive and offshore renewables manufacturing sector, are performing steadily in the North East, there is still great concern in most other sectors as the construction sector is really struggling, retail and hospitality has flat levels of activity and the public sector is experiencing contraction."

Kevin added:

"While there has been some growth in employment, the headlines mask a decline in full-time employment, growth in part-time, temporary and precarious employment and wage levels continue to lag behind inflation, with average wage settlements at 1.1% while inflation remains at 3.4-3.5%."

Nigel Mills, Managing Director of property investors Closewalk Ltd, agreed with the majority. He said:

"Interest rates should stay as they are as the economy is flat or falling. Interest rates are one of the few stimuli in the economy at present and if they were any higher many businesses and individuals would struggle even more than there are currently, causing the economy to falter even more."

Ian Brown, Director of Fresh Element and Owner of P & H Energy UK Ltd, would also like to see interest rates held. He commented:

"Interest rates are no longer a mechanism for improvement. I have recently opened a new café with catering and they're both doing ok but it's got to be at the right price point."

Catriona Lingwood, Chief Executive of Constructing Excellence in the North East, believes that interest rates should be held due to the state of the construction sector at present.

She said:

"If you look at the figures, we've technically dropped back into a double dip recession. This has a lot to do with the construction sector. Even though the GDP has gone down in this sector, it is still significant with regards to growth and any interference with the sector can influence the GDP and a possible small climb out of recession."

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

"There should be no change to the interest rates at present. There is a great apprehension amongst companies that I work with on how to keep business going. Concern in the engineering and the service sector and a great deal of uncertainty means that it would be the wrong time to increase rates."

Jim Willens, Chief Executive of Newcastle Building Society, was of the same mind. He said:

"Interest rates should be held. There has been little change in markets or business confidence to suggest that the economy is strengthening sufficiently to increase interest rates."

Michael O'Connell, Director of EOS, said:

"Interest rates should stay as they are. I believe that the economy is not as buoyant as people are suggesting and there is still a long way to go to recovery."

Phil Heathcock, Financial Director of Tekmar, contributed a more positive note from recent observation.

He said:

"Interest rates should be held as there is growing optimism about the economy in the region at the moment and maintaining rates will back this up in the aim of developing a feelgood factor in the region."