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It’s All About The Base Rate

September 9, 2016

Financial forecast seems to be a ‘two-edged sword’

If you haven’t taken the nearest escape route out of the UK, following Brexit, or claimed your city to be a republic, then the chances are we are all sitting out the repercussions together. Already, the purported risks prior to Brexit seem to be coming to fruition with slower growth, prices rising faster than pay and house price falls. A slump in the Pound – a fall of 12% against the Dollar and 8% against the Euro in less than a month –sees imports costs more. And according to the British Furniture Manufacturers (BFM) price rises of 8-12% may be passed on to consumers as its members battle against price increases in raw materials.

And now there has been a cut in interest rates, to an historic low, in a bid to stimulate the economy and prevent a possible recession. So what could it ultimately mean for the bathroom and kitchen industry? As with most financial moves, the ‘headline news’ seems to be a two-edged sword. With a fall in interest rates, the obvious losers are savers and those with pensions. But it could be advantageous for borrowers who are able to take advantage of lower lending rates – whether that’s homeowners or with a restart of quantitive easing – businesses. Certainly the governor of the Bank of England Mark Carney has implored banks to pass on the savings.

Ultimately consumers who are both savers and borrowers could offer opportunities for high street bathroom and kitchen sales. Since consumers are unable to reap rewards from their savings accounts, they may think it wise to invest in their property for the longer-term – and what better way than investing in a kitchen or bathroom?

Equally, there could be potential sales from homeowners on a variable mortgage or those in the position to remortage their homes, as the fall in interest rates will see more cash in their pocket. And with more disposable income, they may be more inclined to invest in big-ticket items. According to a report on BBC News, around 5.5million people in the UK currently have a variable mortgage, which sees a potentially lucrative market to explore.

Whatever the future holds for the UK economy, there seems to be one clear message from those entrenched in the kitchen and bathroom industry. And that seems to be ‘Keep calm and carry on retailing’. So rather than dwell over what may happen or even be fearful of what may be to come, remember your key learnings from the recession. Continue along the path of ‘business as usual’, even in what may be unusual times.

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