More than half of small business owners in Yorkshire anticipate a rise in interest rates by Spring 2015 – with over half of those respondents saying any increase would have a negative impact on their cash flow.

The findings are drawn from the Close Brothers Business Barometer, a quarterly survey that aims to gauge SME sentiment on a number of financial issues that affect their business.

Lee Hayes, regional sales director for Close Brothers Invoice Finance in Yorkshire, said: “It’s clear that the possibility of increasing interest rates is something that is a concern for a large number of local SMEs.

“The International Monetary Fund (IMF) recently estimated that UK GDP will grow faster than any other Western state in 2014. However, there is a danger that increasing interest rates too quickly could hinder the UK’s economic recovery, which at the moment is growing at a slow but steady pace.”

Mr Hayes said: “Some businesses are sensitive to changes in the interest rate. It can have a serious effect on cash flow as it dictates how much a business can borrow and on what terms.

“An increase in interest rates will affect the amount of disposable income that consumers have and may prompt them to cut back on spending.

“In particular, industries where the goods or services purchased are often financed by debt, for example property, vehicles or holidays, may feel the impact more than other sectors as people seek to reign in their debt financed spending.”

The survey also revealed that 34% of SMEs in Yorkshire think that Labour’s proposed reintroduction of the 50% tax rate will have a negative effect on the economy. Over half of respondents fear that it will stifle entrepreneurship in the UK, while almost a fifth believe that it will drive keys skills and talent from the economy.

“We need to ensure we have the right conditions to allow businesses to grow and flourish,” said Mr Hayes. “It’s important that our top talent isn’t driven elsewhere due to unfavourable tax rates and rising interest rates.

“Entrepreneurship will be key to getting the economy back on track and ensuring our GDP continues to grow at the rate the IMF has predicted.”

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