The Bank of England has reduced the base rate to 4.25%, its second cut in recent months. More reductions may follow this year, but what does this mean in practical terms for your business?
If you’re running a business, it’s easy to assume that lower interest rates are good news across the board. Yes, cheaper borrowing can support investment and ease cash flow. But this needs to be viewed in the wider context of rising business costs – including increases to National Insurance, the national living wage, and supplier pricing pressures.
What should you be thinking about for your business?
Here are a few key points and practical tips:
1. Review your borrowing
If you’ve got outstanding loans or commercial mortgages, now’s the time to look at refinancing. Could you switch from a variable to a lower fixed rate? Are there early repayment charges? Get clear on your terms and take legal advice before locking anything in.
2. Check what’s built into your contracts
Interest rate clauses in supplier, customer or finance contracts can automatically change pricing or repayment obligations. Make sure you understand how these work – particularly if they’re linked to the Bank of England base rate or a reference index. This is especially important if your contracts were negotiated in a higher-rate environment.
3. Budget with inflation in mind
Despite rate cuts, inflation isn’t going away just yet. The Bank expects it to rise to around 3.5% later this year before falling again. For you, that means ongoing pressure on wages, materials and energy. Build in contingency and consider whether you need to renegotiate contract pricing or terms.
4. Factor in rising employment costs
April brought increases to the National Living Wage and employer National Insurance contributions. These changes may not be headline news anymore, but they’re affecting your bottom line month by month. Are your employment contracts up to date? Have you reviewed your staffing model to make sure it’s sustainable?
5. Build flexibility into new agreements
If you're entering into new leases, supply agreements or finance deals, think carefully about break clauses, price review mechanisms, and payment terms. Don’t just accept boilerplate wording. Tailoring contracts to current economic conditions can give you options if the market shifts again.
Economic signals might seem positive on the surface, but the reality for many businesses, particularly SMEs, is more complex. Falling rates won’t immediately offset the steady rise in operating costs. That’s why it’s important to take stock, review your legal and financial position, and put safeguards in place.
Whether it’s reviewing contracts, negotiating better finance terms or protecting cash flow, proactive legal support can help you stay ahead of the curve.
If you’d like a conversation about how we can help your business navigate the next six months, feel free to get in touch.
Nusrat Qureishi joins us as the Head of Corporate & Commercial Law. She is a corporate commercial lawyer with more than 20 years’ experience with particular expertise in the sale and purchase of businesses and companies, as well as the establishment of partnerships and other joint ventures.
Having trained and worked for many years for a City Law firm, Nusrat has a wealth of experience of working on high-value and complex corporate transactions. Her experience extends to advising on mergers, investment, shareholder, restructuring, banking and re-financing and corporate governance work. Her clients have included entrepreneurs, owner-managers, mid-market companies, SMEs, PLCs, international corporates, private equity, banks and financial institutions, joint venture parties, LLPs, partnerships and individuals.
Client service is highly valued by Nusrat who invests time to gain a real understanding of her clients’ needs to meet their goals as effectively and commercially as possible. She aims to be involved in the preparation of a business for sale or purchase from an early stage to ensure that the process runs smoothly and without unnecessary risk, helping to reduce both time and cost for her clients. Her experience allows her to advise companies on strategy – enabling entities to realise the next stage of their growth plans and also support more sophisticated businesses to achieve their commercial objectives.
Nusrat’s approach is totally consistent with the ethos of stevensdrake where client satisfaction is valued together with the provision of a high quality service.
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