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Peterborough UK
17:56 on Wednesday
28 February 2001

Hegarty & Co

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Positively Peterborough

Business leaders welcome interest rate cut


Business leaders in Cambridgeshire say that the Bank of England’s decision to cut interest rates from 6 per cent to 5.75 per cent is ‘sensible and welcome’.

The decision comes in the wake of evidence from an Institute of Directors business survey that shows that economic activity slowed down throughout last year. The balance of companies nationally who were more, rather than less, optimistic about their prospects fell from 57 per cent in March to 35 per cent in December.

Stephanie Smye, chairman of the IoD’s Eastern Branch, which has more than 1,000 members in Cambridgeshire, said: “There is a clear demarcation in company performance between the Midlands region, which includes Peterborough, and the South, which includes Cambridge.”

Among Midlands companies the balance of firms claiming to be more optimistic than they were three months ago fell to just 21 per cent, dragging down the national average, while a balance of 39 per cent of firms in the South were more optimistic.

“The picture is heavily influenced by the concentration of manufacturing companies in the Midlands,” said Stephanie Smye. “Manufacturing companies - and especially exporters - are still suffering with firms operating at below capacity and a balance of only 26 per cent reporting normal or above normal order books.”

However, companies still believe they are performing well, despite the deterioration in optimism. The Midlands showed a balance of 81 per cent of companies that believe they are performing well compared with 73 per cent in the South. However, there was a pronounced difference in performance across business sectors with manufacturing on just 59 per cent compared with non-business services on 86 per cent.

“Although the economy slowed throughout last year and business optimism has slipped back, most of the indicators were favourable,” said Miss Smye. “The slowdown in the American economy will depress Britain’s exports and financial markets but European economies are expected to grow quite well this year.

“However, the disappointing signs of a weakening UK economy make this quarter per cent cuts in interest rates a sensible and welcome move. Rates are expected to be cut further, down to 5.25 per cent or lower by the end of the year.”

February 2001

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