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Loan rates to stay frozen

6 June 2005

Further signs of economic slowdown in the UK appear to have put pay to the possibility of an interest rate rise.

Business confidence has fallen to its lowest level since October 2003 and the economy looks set to slow even further.

The latest BDO Business Trends Report reveals that with weakening global demand the Chancellor could miss his economic growth targets of 3-3.5 per cent and face increased difficulty in limiting borrowing.

"The economic news following May's election has been unpromising," commented a partner at BDO Stoy Hayward, Peter Hemington.

"Retail is edging down and the world economy is softening. The latest 'poll of polls' points to a weakening in the UK economy and it is likely that the Chancellor will miss his growth targets," he added.

In light of weakened figures, higher than expected unemployment and a lower average earnings growth BDO Stoy Hayward predicts interest rates will remain on hold when the MPC meet on 9th June.

The chief executive of the centre for economics and business research Douglas McWilliams added: "Government expenditure has picked up in recent months but we expect this to only be a temporary rise.

"The economy has been shored up by business spending but this is expected to slow during the second half of the year."