What does the Interest Rate Increase Mean for Ethnic Minority Owned SMEs?
As inflation is predicted to reach 8% this spring, The Bank of England is expected to raise the base interest rate from 0.75% to 1%, its highest level in 13 years. Experts anticipate that base interest rates could rise by 1.5% to 2% by the end of 2022 resulting in a significant impact on consumers and businesses alike.
The increase means UK SMEs with existing business loans and company credit cards will be forced to spend more on interest payments, reducing cash flow and creating less disposable income with larger overheads. The issue is exacerbated for SMEs owned by ethnic minorities, say business consultancy, QU.
QU has commissioned landmark national research which found that 57% and 48% of Black and Asian Brits respectively are looking to improve their lifestyles through the risk of starting a business. The research unveiled that 56% and 49% of Black and Asian Brits were looking to secure finance for their business growth, yet the Guardian reports that White owned companies are twice as likely to be granted loans than Black owned businesses.
Runnymede, a race equality think-tank, published a report last year which found that people from Black, Asian and ethnic minority communities generally have much lower levels of savings or assets than White British people. This seemingly leads many ethnic minority businesses to apply for high interest credit cards which hinder them from scaling their businesses effectively.
Marla Ubhi, Co-Founder of QU, comments on the barriers for ethnic minority led SMEs:
“Britain’s inclusive business practices have driven us towards progress over the past couple of decades, however, the lack of intergenerational wealth and “insufficient knowledge” about the banking system have proven to be significant obstacles for ethnic minority owned SMEs.
“We designed QU to be an inclusive confidence-inspiring personal and business brand-building programme for everyone, enabling our community of like-minded entrepreneurs to break through the barriers.”