Base rate remains stable, local jobs to be provided for public projects, inflation falls, and the Government announces the creation of a new National Housing Bank
In this week’s blog post, we look at the impact of the base rate remaining stable, how rules could be changed to make it easier for local jobs to be created for public projects, and provide further details on the new National Housing Bank.
No Change for the Bank of England Base Rate
The Monetary Policy Committee (MPC) has decided to keep the Bank of England base rate at 4.25% following its latest review last Thursday.
Their decision was not a great surprise. Inflation is currently standing at 3.4% for May, which is a slight drop since April but is still a significant high after reductions in the rate earlier this year. The MPC considers that inflation will now remain at this level for the rest of the year before falling back towards 2% next year.
The MPC also noted their concerns over a softening in the labour market and continued global economic uncertainty, referencing the recent escalation in the conflict in the Middle East.
What this means for your business:
- Borrowing costs remain steady for now. The MPC’s comments suggest that further rate cuts could be made later in the year and lenders may respond to that by dropping their rates, even in advance of any future cut.
- No change for returns on savings. You should review any cash reserves you hold to ensure they’re earning interest.
- The inflation figures suggest that costs remain a concern, and this is likely to remain the case for the rest of the year. So, it could be important to plan conservatively for the coming months.
The Bank continues to take gradual, cautious steps when it comes to interest rates. If you’d like to review your funding or cash flow strategy, we’re happy to help.
See: https://www.bankofengland.co.uk/
Bidders on Public Projects Face Local Jobs and Skills Requirements
The UK government plans to change procurement rules so that businesses working on major public infrastructure projects help create local jobs and provide skills training.
The changes, currently under consultation, will apply to large-scale public investments in roads, railways, hospitals and schools. For businesses in sectors such as construction, civil engineering, transport infrastructure, and building services, this shift could influence how contract bids are assessed – and who wins the work.
What’s changing?
Under the new plans, public bodies will be expected to favour bids that clearly show how the business will benefit the local community. This might include commitments such as:
- Providing apprenticeships and T-level industry placements
- Opportunities for young people leaving the care system
- Helping people get into work and stay in work in that area
This follows earlier moves to encourage public bodies to consider “social value” when awarding contracts – but the new proposals would make such requirements mandatory on major infrastructure projects.
Why it matters
For small and medium-sized businesses working in construction, maintenance, or infrastructure-related sectors, these changes could become a defining part of how work is won.
Firms that already focus on local employment or work with apprentices may find themselves in a stronger position to compete. On the other hand, businesses that rely heavily on subcontracting without clear community benefit plans might need to rethink their approach.
The government has signalled it will also crack down on empty promises made during the tendering stage by introducing stronger monitoring to ensure companies follow through on job creation and training pledges.
Inflation Falls Slightly to 3.4% for May
According to the latest figures released by the Office for National Statistics, the main rate of inflation decreased from 3.5% in April to 3.4% in the year to May.
Looking at the figures behind the headline rate shows that food prices have increased for the third month in a row. At 4.4%, this represents the highest inflation rate for food since February 2024.
Some feel that these increases are because businesses are passing on the costs of April’s increase in employer’s national insurance.
However, this is not the only factor at play. Prices for chocolate have increased by 17.7% in the year to May. This is primarily due to bad harvests in areas that produce cocoa meaning that stocks of chocolate have been low and pushing prices up.
The figures showed some good news though in the form of cheaper travel prices.
While inflation had reduced in the earlier part of the year, the current figures show that inflationary pressures continue to be felt.
See: https://www.bbc.co.uk/news/articles/c5ygdqp922vo
Government Launches £16bn National Housing Bank to Support Housebuilding and Regeneration
The UK Government has announced the creation of a new National Housing Bank, backed by £16 billion in financial capacity, aimed at delivering over 500,000 new homes and unlocking £53 billion of private sector investment.
The Bank will operate as a subsidiary of Homes England and one of its aims is to support small and medium sized housebuilding businesses by working with private sector lenders to offer more funding options – such as revolving credit – to help them grow and speed up the delivery of new homes.
Key objectives
According to the government, the National Housing Bank will:
- Accelerate housebuilding, helping to unlock sites that are currently considered too risky or complex to get up front lending
- Offer new finance options tailored to small and medium-sized housebuilders
- Support the development of affordable and social housing, in part through £2.5 billion of low-interest loans
This announcement follows the recent Spending Review, which included a £39 billion commitment to affordable housing over the next ten years, and precedes the release of a £725 billion 10 Year Infrastructure Strategy expected to outline a broader national investment plan.
What it means for businesses
For businesses operating in property, construction, finance, or housing delivery, the creation of the Bank may present new opportunities:
- Developers could benefit from a more consistent and stable source of finance for challenging or capital-intensive projects
- There may be improved access to finance, especially for those seeking to grow or take on larger developments
- Investors may see new routes into public-private partnerships designed to share risk and support long-term returns
The creation of the National Housing Bank marks a shift in the way government supports the housing sector – moving toward a more direct, investment-led model aimed at unlocking supply and stimulating private sector involvement. For UK businesses engaged in housing delivery, finance, or construction, this may create new avenues for growth, investment, and collaboration.
See: https://www.gov.uk/government/news/over-500000-homes-to-be-built-through-new-national-housing-bank