UK businesses still holding £176bn in bank accounts offering zero interest
UK businesses are still holding £176bn in bank accounts that offer zero interest despite rising interest rates and high inflation eating away at the value of their cash, says the wealth management firm Lubbock Fine Wealth Management (LFWM).
The £176bn being held in zero interest accounts* has risen by 80% from the £98.9bn that was kept in zero-interest accounts just five years ago.
The Bank of England has repeatedly increased the base rate from 0.1% in the last quarter of 2021 to 5.25% today, its highest level since the 2008 financial crisis. That’s led an increasing number of banks to offer business accounts with substantial rates of interest.
Businesses are being urged to consider moving their money into interest-earning accounts as soon as possible to benefit from the opportunity to earn passive income. Andrew Tricker, director at LFWM, highlights that with inflation (CPI) still standing at 6.7%, the real value of savings kept in zero and low interest accounts is rapidly falling.
Andrew Tricker says: “So long as inflation and interest rates remain high, businesses are losing out significantly by keeping large deposits in zero-interest accounts.”
“Whilst cash accounts never really beat inflation, interest rates are now so high that it is essential to shop around for a better deal on a business bank account to at least keep some pace with inflation.”
“Many businesses have got used to a decade and a half where interest rates were effectively zero, when there was little incentive for a company, without a treasury department, to look for a higher rate on business bank accounts. Those days are now over.
“Businesses need to be aware that the value of money being held in a zero-interest account is being eroded at an alarming rate. With inflation at its current level, they are losing over 6p in value from every pound over a single year. By moving their deposits into business accounts that offer interest, some of this loss can at least be mitigated.”
*As of July 31 2023
Amount of money held by UK businesses in 0% bank accounts