By Claire West
Research1 from Investec Bank (‘Investec’) reveals that between March and August this year, 36% of companies with an annual turnover of £1 million or more have withdrawn a staggering £2.43 billion from their deposit accounts to help pay the higher interest rates on their debts. The average withdrawal made by companies who have done this was £35,270, but some 4% of businesses of this size have withdrawn £100,000 or more from their deposit accounts to help pay for this.
Balance withdrawn from business deposit accounts Percentage of businesses with an annual turnover of £1 million or less who have withdrawn this amount of money over the past six months to help pay for rising interest on their debt
Under £10,000 25%
Between £10,001 and £50,000 6%
Between £50,001 and £100,000 1%
Over £100,000 4%
Source: Investec Bank, August 2010
Jack Jones of Investec Bank said: “Many companies are receiving paltry returns on their savings, and some have clearly decided to use the money in their deposit accounts to pay the more expensive interest they owe on their debts. This is perhaps not surprising when in September 2010 around one in three deposit accounts targeted at businesses were offering 0.1%2 or less Gross AER3 on balances of £50,000.
“However, if you shop around, you can still find an attractive return on your business savings, which can help offset higher interest payments on your borrowings”.
The Investec Business High 5 Account, which requires businesses to make a minimum deposit of £50,000, pays a market leading rate every week4. 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 2.07%4 Gross AER3.