£4.65bn ‘On Hold’ as Business Projects Are Cancelled or Postponed

Research from Investec Bank reveals that 26% of businesses with an annual turnover of £1m or more are holding £4.65bn in cash as a result of cancelling or postponing business development plans during these uncertain economic times.

The average amount of money on hold as a result of this is £86,020 per firm. 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 annual equivalent rate (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 £1,9005.

Small businesses have around £56.756bn 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 £380m. Back in July 2006 when Investec estimates that the average interest rate on business deposit accounts was 2.96%8 gross AER, the corresponding figure would have been £1.68bn.

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.”


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