DAVID RICHARDSON: Here's what Highland businesses need now in light of interest rate rise and cost of living crisis

Earlier this month the Bank of England increased interest rates by half a percent – from 1.25 per cent to 1.75 per cent.

So why all the fuss? Well, 0.5 per cent might not sound much, but it’s the biggest hike in 27 years.

It was done to cool the economy and reduce inflation, but at a dangerous time for smaller businesses.

Increased interest rates will affect businesses in Ross-shire both directly and indirectly. Most people who borrowed to purchase or develop their businesses will see their repayments shoot up, while businesses seeking to borrow now to maintain their operations following the two-year pandemic hiatus might well be put off altogether. That is bad for the future, for it is imperative that businesses maintain the quality of what they’ve got, let alone develop and expand for the future.

And it’s not as though this interest rate increase is an isolated event. Add the eye-watering increases in fuel and utilities costs to the staff/skills shortage and forecast recession, and it’s no wonder that business confidence is low. In fact, confidence in Scotland is at its lowest since the height of the pandemic – late 2020.

Of course, it doesn’t stop there, for increased mortgage payments plus the astronomical increases in energy and other costs are hitting consumers where it hurts too, reducing their discretionary spend enormously. We’ve already seen a dip in consumer demand for holidays in the Northern Highlands this year for a number of reasons, and for a visitor-dependent area like Ross-shire this matters. Much of the county – and especially the western half – is very heavily dependent on its visitor-based economy, and a robust, thriving tourist industry is essential if we want vibrant communities with well-balanced, growing populations, something sadly lacking at the moment.

But all is not lost - governments in Holyrood and Westminster really can make a difference if they act decisively. The Federation of Small Businesses is calling for the introduction of a range of measures to ease soaring costs, such as reversing the hike in National Insurance; cutting VAT and fuel duty; and ensuring that small, independent businesses get the same protection as households. But it doesn’t stop there. During the pandemic, both governments used grant support to keep countless smaller businesses alive.

Not all the money was spent, and the FSB is calling for the large residue to be used to support businesses through the difficult winter ahead. Their communities need them!

David Richardson is the Highlands and islands development manager of the Federation of Small Business

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