The Bank of England’s shock decision to slash interest rates to 3 per cent will help heavily indebted retailers, but analysts remain cautious about the immediate impact on consumers.

Pali International analyst Nick Bubb called the slashing of interest rates by 1.5 percentage points a “panic rate cut” that “at a stroke” wipes nearly£50 million off M&S’s interest bill next year.

“The heavily indebted retailers get a profit and loss boost via lower interest charges – Home Retail is about the only one with lots of cash,” he said.

Singer Capital Markets analyst Matthew McEachran agreed that retailers including M&S, Debenhams, Sports Direct, Findel, Halfords and Topps Tiles will directly benefit from lower debt-funding costs.

“The biggest beneficiaries are where covenant concerns exist and where downgrades have been made,” he said.

While retailers welcomed the rate cut, Bubb cautioned that it remains unclear what is happening in the economy to consumer jobs and spending. He also warned that there is a risk that a run on the pound will increase dollar import costs in the second half of next year.

“Christmas trading is still likely to be subdued, despite falling mortgage rates, and we wouldn't be jumping up and down about sector prospects," he said.

McEachran said the cut may turn out to be good news for homeowners, but that there are no signs that it will be passed on to consumers more generally in the immediate term.

“Today's news is a positive for consumers’ disposable [incomes] but it may take time to filter through,” he said.

McEachran's preferred play is Findel, while Bubb's is Kesa.

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