Bank-rate cut raises hope

The historic one per cent interest rate cut will safeguard jobs and boost high street spending, business leaders said today.

The Bank of England yesterday slashed the rate from three per cent to two per cent – its lowest level for 57 years – to help stave off a deep recession.

The move takes £80 off a typical £125,000 tracker mortgage – as well as last month's dramatic 1.5 per cent cut.

Bosses said the move would help the economy, but would not lead to a major rise in high street spending in the run-up to Christmas.

Steve Goodman, chairman of the Leicestershire branch of the Institute of Directors, said: "It should boost confidence, but won't lead to a massive surge in Christmas shopping. People's confidence is still going to remain low because of what is happening in the economy.

"But it will mean the economy should now start to recover in the second half of 2009."

Tom Brown, manager at Irish Clothing, which has two stores in Leicester and one in Loughborough, said: "This will probably lead to extra spending by shoppers, but not a major surge. It all helps and it is good news at this time of year."

Beleaguered businesses will benefit, say experts, because lower rates will make it easier to secure the funding they need to stay afloat and grow.

Leicester businessman Dennis Kent, president of the Midlands branch of the Engineering Employers' Federation, said: "It's a big boost for manufacturers and it will safeguard hundreds of jobs in Leicestershire."

One person to have benefited from the rate cut is bank worker Sue Farrell, 44, of Narborough, who has seen her monthly mortgage payment fall by £67 after seeing a £100 saving last month.

"I'm delighted," she said. "I only changed to an Alliance & Leicester base rate tracker early last month. It will increase the amount I spend in the shops and I might even treat myself this month, but I will eventually start saving it."