Bank of England Raises Bank Rate to 4% in November 2026: What It Means for Small Business Borrowing
The Bank of England raised Bank Rate by 0.25 percentage points to 4% on 5 November 2026, its first rise since 2023, by an 8-1 vote. It now expects inflation to reach about 5% in the second quarter of 2027.
By Entrepreneur Group · Published
The Bank of England has raised interest rates for the first time since 2023. Its Monetary Policy Committee (MPC) increased Bank Rate by 0.25 percentage points to 4% at its meeting ending on 4 November, with the decision published at noon on 5 November 2026. Eight members voted for the rise and one, Catherine L Mann, wanted a bigger increase to 4.25%.
Rates had been held at 3.75% since early 2026, most recently on 17 September, as we reported at the time. The Bank now expects inflation to rise further next year, driven mainly by higher energy prices.
The decision and the vote
According to the Bank's Monetary Policy Summary, as reproduced by ActionForex:
- For a rise to 4%: Andrew Bailey, Sarah Breeden, Swati Dhingra, Megan Greene, Clare Lombardelli, Huw Pill, Dave Ramsden and Alan Taylor.
- For a rise to 4.25%: Catherine L Mann.
The committee said: "Monetary policy is not on a pre-set path." It will reassess the evidence at each meeting and adjust Bank Rate as needed to bring inflation back to the 2% target in the medium term. The next decision is due on 17 December 2026.
Members did not all read the outlook the same way. ActionForex reports that Alan Taylor described the move as a risk-management rise and said "this is not the start of a hiking cycle", while several members, including Bailey, Lombardelli and Pill, indicated that further rises could be needed depending on energy prices and wage and price data. InvestingLive reported that markets were pricing roughly a 50% chance of another rise in December.
Why rates went up
Inflation was 3.5% in September. The Bank now expects it to reach about 4.5% in the first quarter of 2027 and about 5% in the second quarter, around 1.25 percentage points higher than it projected in July.
Energy is the main driver. In the 15 working days to 27 October, Brent crude averaged $108 a barrel and UK wholesale gas averaged 216p a therm, 38% and 81% higher than when the Bank last published forecasts in July. The Bank estimates direct energy effects added about 1 percentage point to September's inflation, mostly through fuel.
So far there has been limited evidence of these costs spreading into other prices and wages. Some firms are absorbing costs through lower margins or hedged contracts, which the committee sees as temporary. It said the risk of these "second-round effects" is rising, and the rise in Bank Rate is meant to guard against it.
The economy has been stronger than expected, with GDP growth surprising on the upside, but members expect growth to slow somewhat in the coming quarters. The Bank also noted that financial conditions have tightened. InvestingLive reported that the Bank raised its 2027 growth forecast to 1.3% from 1.1%.
What it means for founders
This section is editorial guidance, not financial advice. Take qualified advice before changing any finance arrangement.
- Variable-rate loans and overdrafts priced off Bank Rate are likely to cost more soon. Check your agreements for when changes take effect.
- Fixed-rate borrowing is not affected until the fixed period ends, but plan early if you need to refinance in the next year.
- Run the numbers. Work out what a further 0.25 percentage point rise would mean for your monthly repayments, since some members see a case for more.
- Cash balances may earn more, so compare what your business savings account pays.
- Pricing and costs. With the Bank expecting inflation of about 5% next year, review supplier contracts and your own pricing.
Our explainer on how Bank Rate reaches your business has more on how rate changes feed through to loans, overdrafts and commercial mortgages.
Frequently asked questions
What is the Bank of England base rate now?
Bank Rate is 4%. The Bank of England raised it from 3.75% on 5 November 2026, by an 8-1 vote, with one member preferring a rise to 4.25%.
When is the next Bank of England interest rate decision?
The next Monetary Policy Committee announcement is on Thursday 17 December 2026.
Why did the Bank of England raise interest rates in November 2026?
Higher energy prices have pushed inflation up to 3.5% in September, and the Bank expects it to reach about 5% in the second quarter of 2027. The committee raised rates to reduce the risk that these costs feed into wider prices and wages.
Sources
- ActionForex: BoE Bank Rate increased to 4%, November 2026 Monetary Policy Summary (5 November 2026) (reviewed 5 November 2026)
- InvestingLive: Bank of England raises the Bank Rate to 4.00% (5 November 2026) (reviewed 5 November 2026)
- Bank of England: Monetary Policy Committee dates for 2026 and 2027 (reviewed 5 November 2026)
- Global Banking & Finance Review (Reuters): UK services growth hits eight-month high in October (4 November 2026), on the expected first rise since 2023 (reviewed 5 November 2026)