UK: Caution as Bank of England cuts interest rates to record low
Businesses have reacted cautiously to the latest cut in UK interest rates, to their lowest level in the Bank of England's history.
Interest rates have been cut by 0.5% to 1.5%, their lowest ever level, the Bank of England's Monetary Policy Committee announced yesterday (8 January).
Its move marks another shaving of rates, which stood at 5% only last October, as the Bank and the government attempt to reinvigorate consumer spending and stave off a 1930s-style Depression.
Businesses have reacted cautiously to the move. A British Retail Consortium (BRC) spokesperson told just-drinks today (9 January) that the cut has the "potential" to increase spending if it can translate into extra disposable income.
But, he added, low consumer confidence remains a significant barrier to growing retail sales.
BRC sales figures for December are due out next week and just-drinks understands that these will reflect a very poor month for retail, although food and drink sales have been hit less severely than other sectors.
Many in the UK alcoholic drinks sector, whether beer, wine or spirits, are braced for a tough 2009, particularly following stiff rises in duty tax last year.
Kieran Tobin, spokesperson for Irish Distillers, which produces Jameson whiskey and is owned by Pernod Ricard, told just-drinks that "everyone has taken a hit" in the UK and Ireland over the last 12 months.
He agreed with the BRC that the Bank of England's rates cut would not be enough to keep consumers spending. "Consumers are spooked. It's not just about putting money in peoples' pockets, people have to regain confidence."
The Bank of England provided little to lift the mood yesterday. It said that business activity was likely to continue declining sharply for the first half of this year, and that surveys indicate a further drop in consumer spending.
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