Businesses still hold £176bn in zero interest bank accounts, LFWM finds

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, according to Lubbock Fine Wealth Management (LFWM).

According to the firm, the sum 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.

After the Bank of England repeatedly increased the base rate from 0.1% in the last quarter of 2021 to 5.25% yesterday (26 October), the firm believes it has led to an increasing Shawbrook which offers businesses 4.9% on their savings. 

As a result, the LFWM has urged businesses 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, said: 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 gotten 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.”

He added: “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 be mitigated.”