Investec Bank warns that much of this money will be receiving low returns as its research reveals that the average return on balances of £50,000 in business deposit accounts is only around 0.67% Gross AER, which on the average amount on hold of £86,020 would deliver gross annual interest of just £576. However, if the money was deposited in a market leading account, they could receive annual gross interest of over £1,905.
|
Amount of money ‘on hold’ through companies cancelling/postponing business plans |
Percentage of companies with an annual turnover of £1 million or more that have this amount of money ‘on hold’ |
|
Under £10,000 |
11% |
|
Between £10,001 and £50,000 |
4% |
|
Between £50,001 and £100,000 |
4% |
|
Over £100,000 |
7% |
|
Nothing |
50% |
|
Don’t know |
24% |
Source: BDRC Continental May 2011
Small businesses have around £56.756 billion in deposits with banks, and if they are receiving the average interest rate in the market, the annual return they would receive would be around £380 million. Back in July 2006 when Investec estimates that the average interest rate on business deposit accounts was 2.96% Gross AER4, the corresponding figure would have been £1.68 billion.
Commenting on the findings, Linda McBain of Investec Bank said: "With the Bank of England base rate at 0.5%, many business deposit accounts are paying low returns, in many cases much less than 0.5%. Indeed, our research shows that 32.4% of business deposit accounts are paying 0.1% or less on balances of £50,000.
"However, with many different business deposit accounts to choose from, you don't have to accept this and you may be able to secure a return on your money that is higher than 2% Gross AER, for example."
