Bank rate cut vital to SMEs, says FSB

A reduction in the Bank of England lending rate of 1% would help millions of small businesses against recession, it has been claimed.

The Federation of Small Businesses (FSB) believes that the monetary policy committee (MPC) should cut the lending rate by a full percentage point when it meets tomorrow (5 November).

The view of the FSB is being backed by three quarters of small businesses, according to a recently conducted poll by the federation.

John Wright, FSB national chairman, commented: "We don't want to head the way of the early 1990s, when 1,000 small businesses a week were collapsing."

"This can be prevented if the banks relent and release money and consumers start to spend a bit more. All this is reliant on that cut in interest rates."

He added that a cut in the base rate would hopefully encourage banks to start lending more.

Earlier this week, the FSB also demanded that the UK's lenders take up the European Investment Bank's £4 billion small business rescue package.