Bank of England holds at 3.75% as three policymakers push for hike

The Bank of England has held Bank Rate at 3.75%, but a widening split among policymakers has increased the risk that UK businesses could face higher borrowing costs if energy-driven inflation persists.

The Monetary Policy Committee voted by six to three to maintain the rate. Megan Greene, Catherine Mann and Huw Pill supported an immediate quarter-point increase to 4%, arguing that acting early could reduce the likelihood of higher energy costs becoming embedded in wages and business pricing.

The previous meeting produced a seven-to-two vote for no change, meaning an additional policymaker has now joined the group favouring tighter policy. Bank Rate has remained at 3.75% since December 2025.

UK consumer-price inflation has fallen to 2.6%, but the Bank expects it to rise again later in the year as higher oil, gas and fuel costs pass through the economy. It said energy prices remained volatile and above levels recorded before the renewed conflict in the Middle East.

The Bank also noted that borrowing costs faced by companies are higher than before the conflict. Those tighter financial conditions should restrain demand and inflation, but they also increase the cost of overdrafts, revolving facilities and other forms of working-capital finance.

For businesses, the decision removes the immediate risk of a rate rise but offers limited prospect of near-term relief. Companies facing higher energy and input costs may need additional liquidity at the same time that financing remains expensive.

Receivables financiers and asset-based lenders may see stronger demand from businesses seeking alternatives to unsecured bank credit. However, lenders will also need to consider whether customers can pass higher operating costs through to buyers and whether debtor payment performance is beginning to weaken.

The split vote is particularly important because it shows that the next move is no longer assumed to be a reduction. The Bank said risks to its inflation outlook were tilted to the upside and that it was prepared to act if higher energy costs generated wider second-round effects.

Businesses should therefore avoid basing cash-flow plans on an early decline in interest rates. The decision leaves the UK in a prolonged period of restrictive financing conditions, with future policy increasingly dependent on energy markets and corporate pricing behaviour.