A 0.25 per cent interest rate cut has been welcomed by businesses, but concerns remain about future cost pressures.

The Bank of England reduced the base rate to 4.75 per cent, a move that has been acknowledged by many companies who are reliant on borrowing to stay afloat or expand.

However, Mark Barrie, head of debt advisory at Azets, a top 10 UK accountancy and advisory firm, has expressed concerns about the limited financial relief this cut will provide.

Mr Barrie said: "Businesses don’t feel like dancing. The 0.25 per cent reduction to 4.75 per cent will be welcomed by a lot of businesses, many of whom are having to borrow money to either keep afloat or expand.

"But they know the cut is unlikely to bring any meaningful financial relief because of new cost pressures coming down the track."

Mr Barrie highlighted several factors contributing to these cost pressures.

These include the increase in employers' National Insurance Contributions (NICs) from next April, which will rise from the current 13.8 per cent to 15 per cent.

The earnings threshold at which employers start paying NICs will also drop from £9,100 to £5,000.

In addition, impending rises in the National Living Wage for those aged 21 and over, and the National Minimum Wage for those under 21, will contribute to higher fixed costs.

Mr Barrie said: "We are already seeing this play out with calls from concerned business owners and directors, with a post-Budget surge in requests for loans to get through the next year or so as the cash squeeze continues."

He also noted that many companies, particularly in the retail, hospitality, and construction sectors, are still reeling from the effects of record inflation, which reached a 41-year high of 11.1 per cent two years ago.

This has led to a drop in discretionary spending as households tighten their belts, a trend that is likely to continue just when businesses need consumers to spend more.

Mr Barrie said: "All of those consequential factors, along with the base rate hitting a 16-year high at 5.25 per cent in August 2023 before coming down to 4.75 per cent, is leaving companies punch-drunk.

"Interestingly, the last time the UK had an official base rate of 4.75 per cent was 18 years ago in August 2006, when a number one UK chart hit was I Don’t Feel Like Dancin’ by the Scissor Sisters – and that title aptly reflects the mood of many businesses right now.

"A welcomed cut in base rate and hopefully this is the start of many more rate reductions to come."