Friday, June 29, 2007

Interest rates - the pain for some public services (but not all)

Today the Financial Times is predicting a quarter point increase in interest rates next week. The Bank of England may be setting interest rates at 6% by Christmas.

As I’ve noted before, this is not only bad news for families with mortgages or other debt – but it adds to the pressures on many providers of public services such as further education colleges and housing associations. Hopefully some of the pain will be eased by finance directors thinking ahead and managing these risks.

Many general further education and sixth form colleges are now borrowing as an integral part of property strategies aimed at transforming tatty buildings into “world class” places of learning. Interesting school sixth forms don’t have to borrow as their capital needs are met 100% - not a very level playing field!

It goes without saying the providers of public services will have to raise their game on finding efficiencies. Otherwise we’ll be back to a world of cuts.

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