SWINDON'S business leaders have welcomed the Bank of England's first interest rate cut for two years.

Yesterday, the bank's Monetary Policy Committee reduced rates to 4.5 per cent amid growing concerns about the health of the UK economy following some of the worst growth in 12 years.

Bob Poole, of Minuteman Press printers in Cricklade Road, Gorse Hill is chairman of the Swindon branch of the Federation of Small Businesses.

He said: "The interest rate cut will be welcomed in Swindon. It is really good news especially for small businesses who feel the pinch as a result of the government's legislation. This cut will relieve some of that burden for those companies."

Dennis Grant, chief executive of Swindon Chamber of Commerce, said that the long-suffering retail sector would benefit most.

He said: "This is fantastic news, particularly in the retail trade where business has become extremely slack, with big names like Sainsbury's and Marks and Spencer suffering, but even the strong high street names like Next are feeling the pinch.

"Manufacturing, distribution and logistical businesses should also see improvements," said Mr Grant. "The reduction in rates should bring a reduction in operating costs and offset the cost of borrowing for investment."

But he also pointed out that there was great danger in reducing the rates, as it would reduce the cost of borrowing and possibly increase the country's already large consumer debt, on credit cards and mortgages.

Director-general of the CBI Sir Digby Jones said: "This cut will be a catalyst for growth and will provide an essential boost to consumer and business confidence.

Graeme Leach, chief economist at the Institute of Directors said: "The IoD had called for a quarter point reduction in interest rates and so the decision was welcome news.

"Failure to cut rates now could have seen a more pronounced 'shift-to-thrift' by companies and consumers. The new lower rate of 4.5 per cent will help put a floor under business investment and household spending growth."

Yesterday's decision will also bring some small relief to mortgage holders who will see around £15 a month knocked off the cost of an average £100,000 mortgage.

Anthony Osborne