THE interest rate rise means investment will be put on hold as customers’ finances deteriorate, the boss of a family-run hotels business has said.
The McKeever Hotels Group owns the Dunadry, Corr’s Corner and Dunsilly hotels in Co Antrim and Dillons in Letterkenny.
Director Eddie McKeever said the base rate hike would make borrowing more expensive .
“It’s going to touch everything in some way. It will affect us because of the loans we have, so it’s going to make it more expensive for us if we’re looking at any capital expenditure,” he added.
“If customers’ mortgages go up, it will mean they pare back their discretionary spending.”
Mr McKeever disagrees with increasing interest rates as a means of reining in inflation.
“I know it’s the only lever the Bank of England has and it’s the go-to way of tackling inflation in the economics textbooks, but inflation at the minute isn’t coming from people over-spending, but from energy prices,” he said.
“People are still going to be filling their oil tanks and their cars after the interest rate rise because that’s a need they have to fill. Something needs to be done about energy prices.”
Mr McKeever said his firm had been looking forward to the return of full business by next year, including the tourist trade.
He was uncertain if international visitors would be enough to make up for an expected fall in local spending, but he does not believe the pressures will be as bad as the last recession in 2008, when he worked in hotels in Dublin.
“That was more of a financial crisis than a typical recession. Unlike back then, this time banks still have money and will be lending,” he said.
“People still have their assets and houses aren’t losing value like they were in the last recession, for example, with people paying big mortgages on houses that don’t have the same value.
“Even though the word ‘recession’ is being used, it’s a very different situation.”
Neil Hutcheson, head of policy at business group the FSB NI, said soaring prices were compounded by labour shortages and tax increases.
“We know the task of tackling inflation is a difficult one, but a jump in interest rates will compound the pressure on small businesses, at least in the short term, as increased costs of finance for small businesses are met with a decrease in consumer spend,” he explained.
“We need to see politicians at Stormont putting themselves in a position to make decisions on the areas for which they hold responsibility, such as energy costs and business rate relief.”