Annan restaurant owner urges UK and Scottish government for more help as interest rates rise to 0.5%

Credit ITV Border
Mr Montgomery's calls come as the Bank of England has raised rates from 1.25% to 1.75% – the highest level since January 2009. Credit: ITV News Border

A restaurant owner in Dumfries and Galloway is urging the UK and Scottish governments for more help as the biggest rise in interest rates in nearly 30 years was announced on Thursday 4 August.

Stephen Montgomery from Annan has just opened a new restaurant in the town and described the 0.5% increase in interest rates as a blow for businesses.

The Bank of England (BoE) has raised rates from 1.25% to 1.75% – the highest level since January 2009.

A warning has also been issued by the BoE that the UK is set to plunge into the longest recession since the financial crisis.

The recession is set to begin in autumn, and last for more than a year, as millions grapple with the cost of living crisis.

The BoE has also predicted inflation will peak at more than 13% as gas prices soar.

Mr Montgomery said: "We rely on footfall as we're volume driven so we still need people to come out.

"If we don't get that footfall through or that volume of turnover and the spend per head comes down by just £5 per person over a week, if you're doing 100 covers per day that's a considerable amount of money.

"That all relates to wages, our turnover, paying back our debt that we've written up over the last two-and-a-half years so we need both governments to look at this."

Mr Montgomery told ITV Border he believes the UK government can change the VAT threshold which he thinks for hospitality should permanently be 12.5%.

He is also calling for the Scottish government to look at rates relief as he claims there is billions of pounds of unspent Covid support money which could be used across the retail and hospitality sectors.

ITV Border has approached the Treasury for comment.

It is expected that real household incomes will drop for two years in a row due to the economic conditions - the first time this has happened since records began in the 1960s.

In 2022 they will drop by 1.5%, followed by a 2.25% fall during 2023.

The recession is expected to at least be shallower than the one witnessed in 2008.

Bank officials said that the depth of the drop is more comparable to the recession in the early 1990s, while projections expect the unemployment rate to start rising again next year.

It won't be until 2023 that the bank predicts to have inflation under control, with the measure expected to drop below 2% towards the end of the year.

Back in Annan Mr Montgomery said: "Many small to medium size businesses will be looking at where they are going to be in the next six, eight or 12 months. This will especially be the case in September when lights are on longer, heating will be on longer as we hit the colder nights.

"We will get through the summer nights as we rely on tourism, but after that there are some people looking towards the end of their contracts and at their utility bills and could decide this isn't the way forward.

"We could be looking at hospitality businesses who are tinkering on the edge right now going into receivership."

Mr Montomery's warning comes as the energy regulator Ofgem announced a change to its price cap updates - confirming they will be reviewed every three months instead of six.

Hikes on the price cap on energy bills could push them to around £3,450.

Listen to ITV News' What You Need To Know podcast: