Business – 6.1 External influences – Economic | e-Consult

The reduction in the policy rate cuts the cost of borrowing, as shown in the table where annual interest on a £1 million loan falls from £50,000 to £30,000. Lower financing costs improve the net present value of expansion projects, making them more attractive. The retail business is likely to:

• Accelerate plans to open new stores or refurbish existing ones.
• Increase inventory levels, taking advantage of cheaper credit to stock up for anticipated demand.
• Consider refinancing existing debt to reduce interest expenses, freeing cash for other investments.

Overall, the monetary‑policy easing encourages higher borrowing and can stimulate growth in the retail sector.