Firms hit hard by interest loss

SMALL and medium-sized firms have lost up to £1.49bn in interest payments since the start of the financial crisis as banks slashed interest rates.

Average returns fell from 2.94 per cent gross annual equivalent rate (AER) in October 2008 to just 0.21 per cent by February of this year, according to a study of high street bank business deposit accounts with published rates by Investec Private Bank.

Investec said small firms currently have about 54.5bn in high street bank deposit accounts and the fall in interest rates – the Bank of England base rate is currently 0.5 per cent – could cost them as much as 1.49bn in lost gross annual returns.

Jack Jones, from Investec, said: "Research shows that, as at February 2010, 79 per cent of business deposit accounts from high street banks are currently paying less than 0.2 per cent interest."

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