If the Bank of England holds interest rates steady again next week, it would be indefensible.
The UK economy is clearly suffocating under the weight of tight policy, and the longer the Bank delays, the greater the damage, particularly to businesses already stretched thin by years of compounding pressure.
Economic growth has evaporated. GDP was flat in May, following just 0.2% growth in April. That’s not stability, it’s stagnation. The country is treading water, whereas the European Central Bank, has already begun easing, and the US, where expectations for rate cuts are mounting
The UK’s base rate remains at 5.25%, the highest in 16 years.
For businesses, this translates directly into suppressed investment, shrinking margins, postponed hiring, and shelved expansion plans. Financing costs are too high to justify risk. The result is an economic engine running on fumes, where opportunity is being wasted and confidence is draining.
SMEs are bearing the brunt. These firms make up over 99% of UK businesses and employ more than 16 million people. For them, access to credit is the difference between growth and survival.
When rates are held artificially high in the face of falling inflation and crumbling demand, these businesses are starved of the oxygen they need. It’s a daily reality playing out on high streets, in industrial parks, and across the service sector.
Inflation, the central bank’s main concern, is back under control. At 2.0% in May, headline CPI is now within target. Yet rates remain anchored at levels designed for a completely different environment.
The persistence of tight policy in the face of falling inflation signals a lack of responsiveness and risks tipping a fragile economy into contraction.
And despite inflation easing, the price of money hasn’t followed. Mortgage holders are still renewing at punishing rates. Commercial borrowers are still being asked to absorb costs that no longer reflect underlying conditions.
Meanwhile, real incomes remain under pressure, and consumer demand is stalling. You can’t fight yesterday’s war without sacrificing today’s recovery.
The labour market is also showing signs of strain. Unemployment ticked up to 4.4% in the latest data—its highest level in nearly three years. Vacancies are falling, hiring plans are being scaled back, and wage growth, while still elevated in some sectors, is moderating. The longer rates stay too high, the more likely we are to see real job losses, and a delayed recovery that costs far more to fix.
The global picture reinforces the urgency. The European Central Bank has already started easing. The Fed, though more cautious, has opened the door to cuts this year.
If the Bank of England holds out alone, sterling will strengthen artificially, hurting exports just when we need them most. UK firms will find themselves less competitive abroad, and foreign investors will think twice about entering a market where capital is expensive and policymakers appear out of step.
There is no political justification for delay either. The election is done. The government has a clear mandate and needs economic momentum, not policy paralysis.
A cut next week would show that the Bank is attuned to the risks businesses face, and that it has the foresight to act, not just react.
Some will argue that holding rates longer is the safer path. It isn’t. It simply shifts the risk. Every month of delay increases the chance of a policy error that leaves the UK weaker, slower, and more divided economically. There’s no prize for being the last to adapt.
In fact, businesses have already made their views clear. Surveys from the British Chambers of Commerce and CBI show waning optimism and rising concern about borrowing costs. Corporate sentiment doesn’t respond to abstract targets—it responds to the real cost of doing business. That cost is still too high.
We’re at a moment that requires courage and clarity. The numbers are clear. The signals are everywhere. Inflation is down, growth is gone, and businesses are calling for relief. The Bank must listen. A rate cut next week would not be a gamble; it would be a long-overdue correction.
