Tandem Bank boss calls for rate cut to kick-start UK economy

Bank chief Ricky Knox says the ‘economy needs a boost from lower interest rates’.

Interest rates should be cut to kick-start growth in a faltering UK economy due to Brexit uncertainty, said a digital bank boss.

Ricky Knox, chief executive of app-only lender Tandem Bank called on the central bank to cut rates to kick-start growth, as currently savers are locking away cash in specialist higher interest accounts.

The call comes a day after the Bank of England said it expected growth this year to be the slowest since 2009 when the economy was in recession.

It forecast growth of 1.2 per cent this year, down from its previous forecast of 1.7 per cent made in November, blaming slower-than-expected growth in the eurozone and China as well as stalled business investment in the run up to Britain’s scheduled departure from the European Union on 29 March.

The Bank’s nine-member monetary policy committee also voted unanimously to hold interest rates at 0.75 per cent for the fourth consecutive meeting since they were raised last August.

But Knox said: “Consumers and investors are both uncertain about the British economy. With a ‘no-deal’ still on the table it’s unlikely that this feeling will go away anytime soon. The Bank of England should cut the interest rate to prepare the economy for a post-Brexit world.”

The challenger bank chief added: “The Bank of England continues to warn about the adverse effects of potential Brexit scenarios and I would advocate a rate cut. The economy needs a boost from lower interest rates, but in the meantime savers could look to capitalise on the current rates on offer from banks.”

However, the Bank predicts a one-in-four chance of the economy slipping into recession in the second half of this year.

Bank of England Governor Mark Carney said: "The fog of Brexit is causing short term volatility in the economic data, and more fundamentally, it is creating a series of tensions in the economy, tensions for business."

The call from Knox for a rate cut is also a minority view among economists, many of whom say that once the uncertainty over Brexit is lifted the economy will accelerate in the second half of the year, forcing the Bank to raise interest rates to stop it overheating.

Samuel Tombs, an economist at Pantheon Macroeconomics, forecasts that the Bank will raise rates once this year and twice in 2020.

While Paul Dales, chief UK economist at Capital Economics, said: "We still think that a decent rebound in gross domestic product growth, should a Brexit deal be reached, will result in interest rates rising further than the Bank and the financial markets assume."

Last month, Tandem Bank said it had topped more than 500,000 customers a year after gaining a full banking licence.