The Bank of England has held Bank Rate at 3.75%, but not unanimously, and inflation has since moved higher. This article explains what the split vote signals, how rate expectations reach business loans, and what London operators can reasonably plan around before the next decision on 5 November.
What did the Bank of England decide in September?
On 17 September 2026 the Monetary Policy Committee (MPC) voted 6–3 to leave Bank Rate at 3.75%. According to the Bank of England, Governor Andrew Bailey, Sarah Breeden, Swati Dhingra, Clare Lombardelli, Dave Ramsden and Alan Taylor voted to hold. Megan Greene, Catherine Mann and Huw Pill voted for a quarter-point rise to 4%.
The Bank’s published figures show that Bank Rate was also held at 3.75% at the June and July meetings. Rate has now been unchanged for three consecutive meetings. The committee’s next decision is due on 5 November 2026.
Why is inflation pushing against rate cuts?
The main pressure is energy. According to the Bank’s September summary, conflict in the Middle East has pushed up energy prices, with Brent crude at $106 a barrel on 14 September. The committee judged that risks to inflation are tilted to the upside, more so than in July.
The Office for National Statistics (ONS) data show how quickly this has fed through:
| Measure | July 2026 | August 2026 | September 2026 |
|---|---|---|---|
| CPI annual rate | 2.9% | 3.1% | 3.5% |
| CPI services rate | 3.4% | 3.4% | 3.7% |
| CPIH annual rate | 3.1% | 3.3% | 3.6% |
According to the ONS, motor fuels made the largest upward contribution in both months. In August, petrol averaged 161.3p a litre and diesel 181.8p, and motor fuel prices were up 23.0% on the year. By September the annual rise in motor fuel prices was 29.8%, with petrol and diesel at their highest since August 2022 and July 2022 respectively.
The September CPI figure of 3.5% was published on 21 October, after the MPC’s last meeting. The Bank’s September summary expected CPI to reach about 3¾% in the fourth quarter of 2026 and slightly above 4% in the first quarter of 2027, so the latest reading sits below that path but is moving towards it.
What does the 6–3 split actually tell us?
The split is less about whether inflation is a problem than about timing and evidence. The Bank’s summary records both sides’ arguments.
Those voting to hold argued that policy should respond to evidence of inflation spreading through the economy rather than to volatile headline energy prices. Alan Taylor put it this way: “policy should respond to evidence of propagation rather than mechanically to volatile ticks in headline energy prices.”
Those voting for a rise argued the opposite. Megan Greene’s view was that “Waiting for definitive evidence of second-round effects before acting would leave policy behind the curve.” The minority also pointed out that inflation could peak just as 2027 wage settlements are being agreed.
For a business owner, the useful reading is that the committee is not discussing cuts. The debate is between holding and tightening, and a further 0.25-point rise would only need a small shift in the vote.
Is the labour market easing the pressure?
Partly. According to the Bank’s September summary:
- Unemployment was an estimated 4.9% in the three months to July, unchanged since the three months to April.
- Private sector regular average weekly earnings grew 2.9% in the three months to July, down from 3.3% at the start of the year.
- The Bank’s estimate of underlying private sector wage growth is about 3½%, and firms expected one-year-ahead wage growth of 3.4%.
- GDP grew 0.4% in the second quarter of 2026.
The committee described labour demand as weak, with some slack that has probably stabilised. That is the argument for patience.
How do rate expectations reach a business loan?
Bank Rate is the starting point, but what firms pay reflects market expectations of future rates as well. The Bank’s September summary says financial conditions have tightened since July, driven by higher short-term market interest rates, and that changes in those rates pass quickly to household and business lending rates. It adds that those rates remain well above pre-conflict levels, and that the quoted rate on two-year fixed-rate mortgages is about 95 basis points higher than before the conflict.
That means a lender’s pricing can rise even when Bank Rate itself has not moved. Fixed-rate quotes tend to follow market expectations of where rates are heading; variable-rate loans and overdrafts follow Bank Rate and the lender’s margin more directly.
A worked example for a variable-rate loan
Illustrative arithmetic, ignoring fees and capital repayments, on a £300,000 interest-only facility:
| Change in rate | Extra interest per year | Extra interest per month |
|---|---|---|
| +0.25 percentage points | £750 | £62.50 |
| +0.95 percentage points | £2,850 | £237.50 |
| +1.00 percentage point | £3,000 | £250.00 |
The 0.95-point row borrows the size of the shift the Bank cites for two-year mortgages, purely as a scale reference; it is not a forecast of any business loan. A quarter-point rise is small for a firm with healthy margins. Several rises, layered on top of higher energy and wage costs, are what squeeze thinner-margin businesses.
Is credit still flowing to firms?
On the Bank’s money and credit statistics for August 2026, private non-financial corporations borrowed a net £7.7 billion, after raising close to nothing in July. Bank loans accounted for £5.7 billion of that, reversing £0.9 billion of net repayments in July.
One month of data says little about a trend, and the figures do not separate London from the rest of the UK. They do show that borrowing has not stopped, which fits with the picture described in the financial pressures London’s small businesses are navigating: firms are still borrowing, but they are more selective about it.
What is quantitative tightening doing in the background?
The MPC also voted unanimously in September on its stock of gilts bought under quantitative easing. According to the Bank, it held £488 billion of gilts for monetary policy on 16 September 2026. The plan is to reduce the stock to zero by about 2034, through £20 billion of annual sales alongside maturing bonds.
The detail is specific. Of the £488 billion, £120 billion of the longest-dated gilts will be retained to back banknotes, leaving £368 billion to unwind. Of that, £222 billion will mature passively and £146 billion will be sold. The arithmetic checks out: £222 billion plus £146 billion is £368 billion, and £368 billion plus £120 billion is £488 billion.
Over the previous twelve months the stock fell by £70 billion, of which £21 billion came from sales. The Bank’s plan is a gradual, long-dated process rather than a sudden change.
How might London firms plan around a split committee?
The Bank cannot tell firms what rates will be on 5 November, and neither can this article. What the published evidence supports is a set of sensible questions, rather than any recommendation:
- Is the facility variable or fixed? Variable-rate debt follows Bank Rate directly; fixed-rate debt is exposed when it is refinanced.
- When does the next refinancing fall? A loan or lease renewal due in the next six to twelve months is more exposed to current market pricing.
- How much headroom is there in cash flow? A firm that can absorb a one-point rise on its debt without missing payments is in a different position from one that cannot. The fundamentals are set out in what business owners should understand about cash flow.
- Are energy contracts also resetting? Higher fuel and energy prices hit costs and borrowing at once, as examined in how UK firms are handling energy costs, margins and pricing this autumn.
Government-backed schemes can ease access to credit for some borrowers, although they do not change the underlying interest rate environment. The recent reforms are examined in what has changed in the Growth Guarantee Scheme.
What to watch before 5 November
Three things will shape the next decision. The first is further inflation and wage data: if second-round effects, meaning energy costs feeding through to wages and prices, become clearer, the minority’s case strengthens. The second is energy prices themselves, since the Bank links the inflation outlook to how long they stay high. The third is the vote count. A move from three members favouring a rise to four or five would be a stronger signal than any single inflation reading.
Equally, a softer labour market, with unemployment at 4.9% and wage growth easing, could keep the majority on hold.
A split committee, a firm plan
Bank Rate stands at 3.75%, held in a 6–3 vote, with inflation at 3.5% in September and the Bank’s own projections pointing higher. For London businesses the realistic planning range runs from a hold to a modest rise, not a cut. The practical discipline is to know when debt reprices, how much cash headroom exists, and how exposed margins are to energy and wage costs.
This article is general information, not tax, legal or financial advice. Interest rates, inflation figures and lender terms change, so check current details with the Bank of England, the ONS and your lender.
Sources: Bank of England; Office for National Statistics
