The number of empty shops has continued to fall but remains higher than pre-pandemic levels (Tim Goode/PA)
(Picture: PA Wire)SMALL firms in London, the “lifeblood” of the capital’s economy, will be acutely hit by the UK’s plunge into recession, business leaders warned today.
The London Chamber of Commerce and Industry (LCCI) “implored” the Government to ease the pressure on small and medium-sized business already struggling under the burden of higher costs and weakening demand.
The appeal came the day after the Bank of England forecast two years of recession and lifted its key interest rate by 0.75% to a 14-year high of 3% in a move that will add a huge extra interest burden on already struggling firms that have borrowed heavily .LCCI chief executive Richard Burge told the Standard: “We are deeply concerned by the Bank of England’s forecast that the British economy will be in a recession until mid-2024. This would mark the longest recession in our modern history. With the cost of doing business at an all-time high and still climbing, the Bank of England’s biggest interest rates rise in over 30 years will only serve to heighten business’s economic concerns and make financing investment more expensive.
“Small businesses, the lifeblood of London’s economy, will feel this rise acutely and we urge the Government to relieve some of the mounting pressure on these SMEs. We implore the Ggovernment to be measured in the burden they place on already badly strained businesses, which will be crucial to driving an eventual economic recovery.”
New figures showed industrial orders in Germany, one of Britain’s biggest trading partners, fell more than expected in September, increasing fears that the once mighty powerhouse of the European economy is already in recession. New orders at German factories fell by 4.0% month-on-month, including a 7% tumble in foreign orders. Analysts had expected a much smaller fall, to 0.5%.
But on the currency markets the pound made up some ground against the dollar after yesterday’s big falls and by mid-morning was up almost half a cent at $1.1224.
The rise in mortgage costs is expected to have a huge knock on effect on consumer demand as home owners cut back on their spending.
Alex McCulloch of consultant CACI says 1.75 million households will see fixed-rate deals come to an end next year.He said: “For the 7.5% of those households with mortgages higher than 350k, this could be greater than a £900 monthly increase that will disproportionally affect London and the South-East. We estimate that more than one in five London mortgages one in 10 in the South-East are over £350,000.”
CACI thinks £5 billion of consumer spending will shift to mortgage payments. “We anticipate a significant decrease in real-term spend on consumer goods in 2023,” said McCulloch.
