A potential commercial awareness question, any ideas?
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What would an interest rate hike mean for commercial law firms? watch
- Thread Starter
- 02-11-2017 17:19
- 02-11-2017 21:48
What do you think, logically? Break it down by what would happen to exchange rates, etc. And then think about how that might impact on clients and their decisions...
- 02-11-2017 23:10
Here's an economic perspective
increased interest rates usually mean a few main things...
Lower economic growth
Increase in the cost of borrowing.
Increase in mortgage interest payments.
Increased incentive to save rather than spend.
Reduced confidence. -(People are disincentivized to make risky investments and purchases that may not be essential.)
I would interpret this logically and relate it to law firms but one starting point might be that UK exports may be less competitive and exports will be cheaper, so firms may gain legal aid from abroad. However, IMO this is unlikely because with current account deficit that the UK has with the services industry (such as finance and law) being our biggest export.
But pretty much relate these effects on commercial law and make judgments on how likely they are to take place
- 03-11-2017 01:00
UK exports will be less competitive because of the impact of interest rates on exchange rates, increased interest rate essentially means increased return on holding £s, which means increased demand for £s and strengthens the currency. Hence our exports become relatively more expensive, but imports relatively cheaper.
But yeah...think about how those economic effects might impact law firms...what does a stronger pound mean? It might make legal services more expensive for businesses who trade in other currencies, for example.