Uncertainty over interest rate cut adds to importance of Spring Budget: Olga Watterich

It’s a similar picture globally with calls for rate cuts to boost economic growth in Germany after it fell into recession and in the US given its higher-than-expected inflation data.

Financial markets are scaling back their bets on rate cuts from the biggest central banks as they price in their continued war on inflation.

For businesses in Yorkshire and the Humber and across the nation grappling with rising borrowing costs and resulting weak consumer demand – a rate cut would ease the cost of doing business, enabling investment in capital and labour as well as alleviate pressure on households struggling with the cost-of-living crisis.

Former chief economist Andy Haldane made headlines recently arguing that by keeping borrowing costs at the highest level in 16 years, the Bank of England risks ‘crushing the economy’.

On the flipside, policymakers are adopting a cautionary approach, citing ongoing risks from a tight jobs markets and still-strong inflation in the services sector as reasons not to pursue a premature cut.

As the domain of the Bank of England, monetary policy cannot be influenced.

But, on the fiscal and policy fronts, government has powerful levers to move the dial for UK business. The Spring Budget is an opportunity for politicians to back business with credible solutions that kick-start long-term, sustainable growth in Yorkshire and the Humber and the rest of the UK.

The CBI’s Budget recommendations have the potential to unlock business investment now, including a Net Zero Carbon Plan, a globally competitive R&D Tax Credits scheme as well capping the increase in the business rate multiplier in England for another year and extending full expensing to cover leased and rented assets.

To supercharge the economy in the next decade and beyond, the government must get to grips with some of the systemic issues holding back the economy. ONS statistics in February show that the number of those out of work due to long-term sickness stands at a record 2.8 million.

Securing a healthy labour force is the bedrock of economic productivity and prosperity.

To address this the CBI is calling for an expansion of non-taxable health support to employees to encourage them back into the workforce.

It’s also critical the government delivers the planned expansion of eligibility to 30 hours of funded childcare alongside measures to ensure the availability of high-quality childcare places.

If weakness in the economy persists throughout 2024 – pressure will no doubt continue to pile on the Bank of England to pursue a fall in interest rates from its current rate of 5.25 per cent sooner rather than later. Without a crystal ball we cannot be sure when that move will come for business.

That’s all the more reason to take tangible action now to hone a sound business environment, firming up the country’s foundations to make the UK the most innovative, competitive and trusted destination for investors, boosting growth and living standards at the same time.

Olga Watterich is CBI deputy regional director for Yorkshire and Humber