How will low interest rates effect businesses?
Low interest rates can effect big businesses in a few ways The general theory is that lower interest rates mean that the costs borrowing are reduced (i.e. mortgage payments, credit cards etc) therefore consumers will feel like they are cash rich and be more tempted to spend more money in shops like M&S. However, if you have a population of savers, low interest rates will damage the amount of interest payment received on a their savings balance and therefore they will spend less because they will not feel as cash rich. If M&S needed to get a large loan (£50-£60m) for expansion (lets say) then they will find that the rate of interest they would pay would be far less thus potentially allowing for lower prices across there stores to reflect the savings in their monthly interest payments. In the long term prices tend to raise when interest rates are low because it will stop consumers from spending too much money.
