Just how much is the interest rate cut worth? The FSB says close on a billion pounds.

UK small business will head into the festive season with around £750 million saved - this according to the Federation of Small Business (FSB) who have put a price to the interest rate cut just announced by the Bank of England.

The Banks Monetary Policy Committee (MPC) has said the interest rate would fall from 4.5% to 3%, much to the delight of the UKs premier voice for SMEs.

Federation of Small Businesses National Chairman John Wright said:

“The Federation of Small Businesses welcomes the Bank of England's interest rate cut of one and a half per cent, from 4.5 per cent to 3 per cent. We called for a bold one per cent cut and this unexpectedly large rate cut will make an enormous difference to small firms and will put money in people's pockets before Christmas. The cut amounts to a generous saving for small firms of £750million on loans and overdrafts."

Wright aired concerns that the only spoiler of this party was the lending instiutions themselves who are under no obligation to pass on the benefits to their small business customers.

Today the Financial Times drew attention to those providers who have pulled more competitive deals from the market, despite appeals from the prime minister for lenders to pass on cuts in interest rates.

Woolwich, Lloyds TSB and Northern Rock on Wednesday all removed tracker mortgages, which follow the movements of the Bank of England base rate, ahead of today's announcement.

David Bexon, Managing Director of SmartNewHomes.com, said that unless the lenders passed on the benefits the decision by the Bank of England’s to drop interest rates by 1.5% would mean little for the economy.
 
Bexon said, “While news of this heavy rate cut is welcome in the current climate, the latest drop in rates will have very little bearing on the market, unless we see these cuts passed onto borrowers with immediate effect."
 

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