Iran Conflict Drives Up Borrowing Costs for Midlands SMEs
The ongoing conflict in Iran is pushing up borrowing costs for small and medium-sized enterprises (SMEs) in the Midlands, according to a sector specialist. Mark Barrie, head of Debt Advisory at UK top 10 accountancy firm Azets, believes the war will prompt unexpected interest rate rises that will also curb investment.
The situation is particularly affecting sectors such as manufacturing, logistics, haulage, hospitality, and construction, with business owners expressing a general feeling of uncertainty. Prior to the conflict, it was expected that Bank of England base rates would be reduced by 2026, but this has been put on hold, and some economists are now predicting one or two hikes in interest rates.
The current base rate is 3.75%, which is significantly higher than the pre-conflict expectations of around 3%. This increase in borrowing costs will make it more expensive for SMEs to secure new finance, leading many to think twice before investing or taking on new projects.