FSB warns on interest rate cut

The Federation of Small Businesses has welcomed the surprise news that the Bank of England has cut interest rates by 0.5% to 4.5%.

The move will relieve some of the financial pressure on small firms and should provide a much-needed boost to consumer spending in the run-up to Christmas.

But the FSB also warned that the reduction would only work if banks transfer the rate cut into lower charges for small business loans.

"This should be very helpful to Britain's small businesses but the welcome cut will only come into play if the banks follow through and reduce their charges to small businesses accordingly.

"We would urge the government, now that it has a stake in the banks, to ensure all base rate cuts announced by the Bank of England are honoured by the clearers."

The Bank of England cut interest rates as part of a wider European move, with five other central banks including the US, China and the European Central Bank also slashing rates by 0.5%.