Low interest rates are costly for UK SMEs
(9 April 2010 – UK) Low interest rates in the UK are significantly affecting SMEs’ gross annual return on their deposits, according to research conducted by Investec Private Bank.
Investec’s analysis revealed that the average return on published rates for high street banks’ business deposit accounts fell from 2.94 percent gross annual effective rate (AER) in October 2008, to just 0.21 percent gross AER by February 2010.
The financial blow to SMEs, as a result of the fall in interest and based on the current amount these businesses hold in business deposit accounts of around £54.5 billion, could amount to as much as £1.49 billion lost in gross annual returns.
Jack Jones, Investec’s spokesperson, said that the Bank of England’s base rate has fallen by 4 percent since October 2008, resulting in many banks and building societies slashing rates of interest on their deposit accounts.
Investec’s research shows that, as at February 2010, 79 percent of business deposit accounts from high street banks are currently paying less than 0.2 percent interest, which makes it all the more important for businesses to ensure that they are receiving a fair rate of interest on their money. If they are not, they should be prepared to switch to a more competitive account, Mr Jones added.
The financial blow to SMEs, as a result of the fall in interest and based on the current amount these businesses hold in business deposit accounts of around £54.5 billion, could amount to as much as £1.49 billion lost in gross annual returns.
Jack Jones, Investec’s spokesperson, said that the Bank of England’s base rate has fallen by 4 percent since October 2008, resulting in many banks and building societies slashing rates of interest on their deposit accounts.
Investec’s research shows that, as at February 2010, 79 percent of business deposit accounts from high street banks are currently paying less than 0.2 percent interest, which makes it all the more important for businesses to ensure that they are receiving a fair rate of interest on their money. If they are not, they should be prepared to switch to a more competitive account, Mr Jones added.
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