4/10/10

By Claire West

Research from Investec Bank (‘Investec’) reveals that between the middle of June and September this year, 10% of businesses with an annual turnover of at least £1 million planned to borrow on average £98,560 each from banks or collectively £1.97 billion. This is roughly about the same as for the previous three month period.

However, due to uncertainty concerning the UK economy, many businesses are reluctant to borrow at the moment, and are waiting for stronger signs of an economic recovery. Investec’s research reveals that 63% of businesses with an annual turnover of £1 million or more are not planning on borrowing any money from banks between the end of June and September this year, and a further 17% are unsure as to how much they want to borrow.

An estimated 5,000 organisations have been turned down for credit from banks over the past six months, and of these, some 6% are spending more time chasing debtors as a result of this, and 5% are taking longer to pay creditors.

As a further sign of concern about the trading environment, Investec’s research also reveals that 9% of businesses with an annual turnover of £1 million or more have cancelled or postponed business development plans, which has collectively saved them over £600 million.

Jack Jones of Investec Bank said: “With a high degree of uncertainty over the economy, many businesses are reluctant to borrow money from their high street banks, and are either keeping their savings in deposit accounts, or using it to pay bills. Indeed, some deposit accounts are paying such derisory returns, that we expect to see more businesses using their cash reserves as capital to pay for projects and other costs within their organisations.

“Our research shows that 13% of accounts aimed at businesses are now paying less than 0.1% Gross AER on balances of £50,000 for example, which is negligible. Businesses need to ensure that they are receiving a competitive return on their cash reserves and if they are not, be prepared to switch to another account.”

The Investec Business High 5 Account, which requires businesses to make a minimum deposit of £50,000, pays a market leading rate every week. This is because each week, the independent financial product research company Moneyfacts will take the five highest savings rates in the business savings market across the categories of no notice, 7, 30, 60, 90 and 90+ day notice accounts, find their mid-point and use this to set the rate for the Business High 5 Account. As well as being assured one of the best rates available, businesses also have the added benefit that the rate is set independently.

The Business High 5 Account, which has a three month notice period, does not rely on bonuses to inflate its rate. The current rate is 1.96%[4] Gross AER[3].

To find out more about the Investec Business High 5 Account or Investec Bank’s other unique savings products, please call 0845 366 6333 or visit www.businesshigh5.co.uk