Earlier this year, Bank of England governor Andrew Bailey said he would not remove negative interest rates from the table if lenders and consumers need special incentives to loosen the strings during a community slump recovery. Interestingly, a study conducted by FJP Investment shows that half of UK investors are concerned about the prospect of such measures being introduced.
The investment company reports findings from an independent commissioned survey of more than 1,000 UK-based investors. All have saved and invested in over £10,000, with the exception of pensions and major residences.
The data showed that around 49% of those asked believe that the introduction of negative interest rates will harm investments, but only 12% believe that they will benefit from such a scenario.
Furthermore, around 40% said they would restructure their portfolios in response to negative interest rate announcements, while only 14% said they were certain they would leave their investment portfolio. The rest (46%) say they don’t know how to manage changes.
Commenting on the data, Jamie Johnson, FJP’s investment CEO, said, “Investors are clearly worried about the impact of negative interest rates on their portfolios. The Bank of England has not played this card yet, but there is still a lot of speculation that negative rates could be turning the corner.”
The Bank of England announced last Thursday it would maintain an interest rate of 0.10% until the new year, so speculation remains about a transition to a negative rate in 2021 if economic sentiment and productivity do not improve at desirable rates.
“If we keep Covid-19 cases under control and strict lockdown measures remain, the UK economy’s recovery will be significantly hampered. In these circumstances, negative interest rates may come out sooner rather than slower. In any case, investors must start preparing now to avoid negative impacts on their portfolios,” Johnson added.
In general, negative interest rates offer negative aspects to cautious savers and potential benefits for active companies such as VCs and startups. To encourage people to spend their economy from sleep, negative rates will reward borrowing and punish capital protection. As IW Capital CEO Luke Davis said, following previous speculation:
“Bank of England policymakers are defending the potential use of negative interest rates and calling out consequences from other countries. This move could mean that savers are effectively encouraged to borrow money and increase their spending by paying to earn money with the bank.”
