The Bank stated that the UK is still set to enter recession this year, however it will be shorter than previously thought, expected to last just over a year, instead of the initially predicted two years.

The all-important question on the mind of startup founders and entrepreneurs is, how will this rise in interest rates affect startups?

Startups Magazine caught up with industry experts and business owners to find out.

In short, the rise in interest rates is likely to shrink the volume of capital being deployed in VC funds, and ultimately, startups. This is because investors are likely to favour companies with more predictable profits and cashflows over riskier startups and business models.

Andrew Megson, CEO of My Pension Expert, said: “Another jump in interest rates, now to a 15-year high, would be great news for pension planners in times of stability – but we’re not in those times. The base rate is still less than half the rate of inflation, meaning people’s savings are losing value in real terms.

“Living costs are continuing to rise and this is placing relentless pressure on retirement plans. My Pension Expert’s own research found that only 35% of Britons think they’ll be able to retire when they want to. It certainly seems that Jeremy Hunt might get his wish to keep more people in their 50s, 60s and even 70s staying in work. But, of course, it is not for him to demand that.

“Rather, everything possible should be done to support people in their financial planning, allowing them to achieve the retirement they deserve despite these volatile economic times. To that end, more should be done to champion the role of independent financial advice.

“While there are likely to be tough times ahead, seeking advice will provide welcome reassurance that Britons are doing all that they can to protect their hard-saved pension savings and achieve their retirement goals."

Mohsin Rashid, CEO of ZIPZERO stated: “Many had hoped the IMF’s sobering analysis earlier this week, revealing that the UK is to be the only major economy to shrink in 2023, would inspire the Bank of England to hit the brakes. Instead, the MPC’s latest increase marks the tenth in a row since 2021 and a devastating blow to British consumers and businesses.

“With the outlook on Britain’s growth so bleak, the Bank’s latest step is likely taken with great reluctance and yet taken, nonetheless. Clearly, the Bank of England has no faith in the Government’s ability to tackle inflation alone, which has remained in double-digits for months.

“Yet such increases are simply not sustainable. As the Chancellor continues to shout about making Britain the next Silicon Valley, interest rates now stand at their highest level since 2008 and life continues to get harder.

“Abandoned by their government and faced with great uncertainty ahead, consumers and businesses must band together and provide mutual support. For businesses, that means restraint, they must avoid passing rising costs onto consumers and focus on incentivising loyalty, through which consumers will return the favour.”

Jatin Ondhia, CEO of Shojin, said: “After ten consecutive rate hikes, there is a worrying sense of déjà vue, as the Bank of England’s heavy-handed approach shows no signs of abating. Undoubtedly, this move will present further challenges ahead, just days after the IMF downgraded its growth forecast for the UK’s economy.

“As investors continue to navigate testing market conditions, the reduction of real returns through higher inflation represents a significant threat to both fixed income investments as well as equities. Against these headwinds, investors must keep a cool head and consider the tools at their disposal to make their money work harder.

“I would expect the diversification of investment portfolios to remain a prominent trend in 2023, as inflation remains in double figures but rates rise. It is also likely that tax-efficient investments will gain increasing traction in the months ahead, with investors trying to manage returns in the most effective ways possible.”