9:24 am, February 7, 2025
The Bank of England’s decision to cut interest rates is a ‘welcome development’ for the motor trade, following a tough January.
That is the verdict of Cox Automotive, which is backing the move to boost confidence among the UK’s car buyers.
The central bank’s Monetary Policy Committee (MPC) yesterday (Feb 6) voted to cut rates by 0.25% to 4.5% – bringing the base rate to its lowest point since June 2023.
The base rate helps dictate how expensive it is to take out a mortgage or a loan, while it also influences the interest rates offered by banks on savings accounts.
Cox says that the reduction is good news for the motor trade, but warns that market conditions remain ‘challenging’.
Philip Nothard, insight director at Cox Automotive, said: ‘The Bank of England’s base rate decision of -0.25% to 4.5% is a welcome development for the UK automotive sector, especially following January’s decline in new car registrations and ongoing pressure on consumer spending.
‘With inflation expectations stabilising, the automotive industry will hope the move boosts confidence among buyers and provides relief from high borrowing costs, which have weighed heavily on both private and fleet demand.
‘However, with employment stagnating and firms still planning price increases, market conditions remain challenging, and sustained economic stability will be key to supporting long-term automotive recovery.’
Despite the reduction, the bank halved its growth forecast for the UK economy to 0.75% for this year, down from previous estimates of 1.5%, before accelerating again in 2026 and 2027.
The downgrade is a blow to chancellor Rachel Reeves after Labour made growing the economy its key priority. Reeves said the interest rate cut was ‘welcome news’.
‘However, I am still not satisfied with the growth rate. Our promise in our Plan for Change is to go further and faster to kick-start economic growth to put more money in working people’s pockets,’ she added.
The cut to the base rate was not a unanimous decision, with two of the nine members voting to cut rates even further to 4.25%, while the remaining seven voted for a quarter point cut.
The bank said it had not factored the potential effects of Donald Trump’s trade tariffs on its forecasts, adding that it ‘remains unclear what the overall landscape for US and other global tariffs will ultimately look like’.
Pictured: The Bank of England (PA Images)
