By Matthew Legg

Last updated 11:46, Thursday, 09 October 2008

A CUMBRIAN finance expert welcomed yesterday’s shock interest rate cut, but has warned it won’t cure the ills of the economy overnight.

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Bob Wheatcroft: ‘There would still have been pressure on the banks’

Bob Wheatcroft, a partner at Armstrong Watson accountants, Carlisle, said yesterday’s 0.5 per cent cut by six central banks, including the Bank of England, was “vital”.

He added: “If the cut hadn’t come, there would still have been pressure on the banks and that would be translated into pressure on business.

“While people might think this is happening on Wall Street and doesn’t affect us, the fact is it does.

“Capitalism works by money moving around and when it doesn’t, businesses go bust and people lose their jobs,” said Mr Wheatcroft.

“This will, hopefully, allow banks to lend again and businesses to borrow and some sense of normality to return to the system. It won’t happen immediately and people shouldn’t expect their bank manager to knock on their door with baskets of cash, but I think we will see a gradual easing of the rules for good reliable businesses that shouldn’t be in trouble.

“Good businesses which are making money and being stuffed by not having liquidity will see the pressure ease on them now. If not I don’t know where we are going.”

The Bank of England’s Monetary Policy Committee cut rates from 5 per cent to 4.5 per cent yesterday.

At the same time, the US Federal Reserve cut rates from 2 per cent to 1.5 per cent and the European Central Bank (ECB) trimmed its rate from 4.25 per cent to 3.75 per cent.

Rob Johnston, chief executive of Cumbria Chamber of Commerce said: “We are thrilled that the Bank of England has taken this bold and necessary step.

“It will, for now, steady the markets and inject much-needed confidence.”