What would your rate decision be?

After gathering in a wood-panelled room at the Bank of England, the nine members of the Monetary Policy Committee have decided to keep interest rates at 5%.

We don't yet know how they voted individually, but last month they were split - the majority voted to keep rates at 5%, with one member voting for a cut to 4.75% while another voted to raise rates to 5.25%.

With the economy slowing, consumer confidence falling but inflation quickening, what would you do if you were in their position?

We asked a number of business people how they would vote.

DAVID GROOCOCK, OWNER, ST MAUR HOTEL, VENTNOR, ISLE OF WIGHT

Decision: No change

" In the old days, interest rates were used to control inflation. But putting interest rates up now wouldn't make any difference to inflation and would push the country into recession.

Inflation is set to get worse anyway. There's the outrageous 35% increase in gas bills [from British Gas] which means we will have to put prices up.

A rise in interest rates wouldn't be able to do anything about that.
And most businesses here have borrowings, so if interest rates did go up, we'd have to put our prices up, making inflation worse. "

JO MATHERS, WILLIAM H BROWN ESTATE AGENTS, ROUNDHAY, LEEDS

Decision: A cut

" The crucial thing is not the decision itself, but that lenders pass it on and make more money available for mortgages.

There are more houses for sale than there have ever been and we've got more buyers than we've ever had, but many people just can't get a mortgage.

It is really frustrating. We often have a chain of five people fall down because the person at the bottom can't get a mortgage.

The issue is first-time buyers. It doesn't matter how much house prices are falling by, or how much the property is on the market for, if you can't get a mortgage. "

ALASDAIR MACPHERSON, SHETLAND SEAFISH, WHALSEY, SHETLAND

Decision: A cut

" We sell fish to restaurants and caterers across the UK and are the largest employer on the island of Whalsay.

We depend on people going out to eat in restaurants and if rates were cut they would have more money to spend.

But people are being very careful and not eating out as much. We are seeing pubs closing every week and that is having a knock-on effect. Our orders are well down on last year.

Caterers in London we sell to say even banks and other companies who could afford to hold events don't feel they can be seen to be holding parties when they are laying people off. And that also has an effect.

But the biggest financial issue facing us is fuel prices. We have to pay the highest pump prices in the UK and interest rates can't do anything to help with that. "

ALAN BARLOW, CHIEF EXECUTIVE, HAMWORTHY COMBUSION GROUP, POOLE, DORSET

Decision: No change

" We make combustion burners for industry which we sell worldwide. Just 12% of our revenue comes from the UK but domestic inflation is a real problem for us - we source many of our materials from the UK and two-thirds of our staff are in the UK.

The priority has got to be controlling inflation. But the onus should be on the government to do something about energy prices.

Even though the UK energy market is meant to be the most competitive in the EU, prices in the UK seem to be high compared to the rest of Europe. The government should examine the market as it isn't working for domestic and industrial customers.

If it could tackle high energy prices, that would mean consumers had more discretionary spending, that would improve confidence and then people would start buying again - including houses - and that would in turn stimulate the whole economy. "

GILL BROOKS-LONICAN, CHIEF EXECUTIVE, NATIONAL ASSOCIATION OF MASTER BAKERS

Decision: A cut or no change

HOW INTEREST RATES WORK

• In theory, a rate cut can:
• encourage consumer spending and business investment
• stimulate the housing market
• cause inflation to pick up
• In theory, a rate rise can:
• discourage spending and encourage saving
• dampen the housing market
• slow the rate of inflation

" The baking industry is particularly vulnerable to rising prices - there are the rises in the national minimum wage, gas and electricity bills, none of which you can run a bakery without.

In terms of ingredients, it is not just wheat, eggs are up 40%, cream is up phenomenally. Everything has increased by far more than we can pass on to the consumer.

We are really not having a good time. There are more redundancies than I have ever known - and I have been in the industry for 23 years. "

PHIL ELLIOT, MANAGING DIRECTOR, BOOTH DISPENSERS, LYTHAM ST ANNES

Decision: No change

" We make component parts for vending machines. A cut would be welcome but not if it means rates will have to go up again in the near future. Stability is most important to us.

The outlook on inflation is key. The pressures driving inflation are not to do with rising spending - consumer confidence seems to be waning.

Prices are rising because of what's happening in the commodity markets and putting up rates won't do anything to help that. "

RELATED INTERNET LINKS
Bank of England
St Maur Hotel
William H Brown corporate site
Booth Dispensers
Shetland Seafish
National Association of Master Bakers
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