Over the last decade, London has experienced booms, busts, growth and change. There’s currently a question mark over interest rates and whether they will rise. With our close connection to global business at Clarendon we reflect on what impact it might have.
Interest rates have remained at an all time low since 2009. The low rates enabled both businesses and households to remain on an even economic keel during the downturn. Yet as the recovery strengthens interests rates rising again could become reality. The fear over that is felt among small businesses who worry that any growth they might have predicted would be diminished by a rates rise. Over two thirds (67%) of SMEs said they are worried about a rise in interest rates.
London has seen significant economic growth in the last twelve months and much of that is fuelled by innovation and startups, especially around the technology sector. This has boosted London’s reputation and attractiveness for investment on the global stage. It has helped the capital be dominant.
Employment rates along with wage levels have also risen. This is good news for London and it turns the capital into a place that’s prosperous and attractive. Yet while inflation has been low growth has crept above it. The drop in oil prices has also contributed to this record low inflation. It has boosted consumer spending and shown that people are more willing to spend their cash than they were.
This creates a scenario where people are confident. The economy is stable and strong and that confidence is appealing; it attracts investors, it attracts job hunters and global travellers looking to get a slice of London’s wealth. It affects many different industries. As well as extended stay guests, Clarendon sees people jetting in and out of the capital on business, leisure and looking for a temporary base. When people stay at one of our serviced apartments they also spend money in attractions, on transport and travel, in restaurants, bars and shops. The benefits and the spend washes through the economy.
So surely then anything that damages this confidence is a bad thing? An economy has to be strong, there needs to be a balance and interest rates are part of that. But small firms have weathered a bad storm in the downturn and the recovery could be more fragile than we think. An economy is always swings and roundabouts and can often feel like walking a tightrope but we need to fuel and foster confidence so that that money is felt in every corner and corridor of the capital.