Interest rate rise a ‘bitter blow’

While the quarter of a per cent rise in the Bank of England’s base rate announced yesterday took few by surprise, the move was termed a “bitter blow” for the farming industry by a leading accountant.

Commenting on the base rate rise to 0.75 per cent and its potential impact on the farming sector, Jamie Younger, head of rural business with accountancy firm Saffery Champness, said any additional costs would hit the industry hard.

“The sector is already facing reduced yields from harvest because of the exceptionally dry weather and increased prices for winter feed for livestock,” said Younger.

“Input costs have already risen significantly – fertilizer, feed and the cost of energy all rising since the Brexit decision, and the uncertainty that continues through the EU/UK Brexit talks has done nothing to restore confidence.”

He advised farmers with borrowings to talk to their banks and their advisers and to consider either reducing borrowings or moving them from variable to fixed-rate arrangements.

Alex Brandreth of investment managers, Brown Shipley said that, despite the move having been well flagged up, the proximity to Brexit negotiations made the timing surprising.

He said two possible conclusions could be drawn from the approach, adding: “Either the Bank of England feels increasingly confident that we will achieve a positive outcome from ongoing negotiations and growth will remain strong as a result.”

Alternatively, he said, the bank was giving itself the flexibility to stimulate the economy at a later date if a poor settlement was reached.