New research revealed that during the current economic climate, 26% of businesses with an annual turnover of £1 million are holding £4.65 billion in cash as a result of cancelling or postponing business projects.
The study, conducted by Investec Bank, calculated that the average amount of money on hold as a result of this is £86,020 per firm.
It warned that this money would be receiving low returns and would deliver gross annual interest of just £576. But if the money was deposited into a market leading account, businesses could receive an annual gross interest of over £1,900.
Currently, 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.
Investec estimates in July 2006, when the average interest rate on business deposit accounts was 2.96% Gross AER, the corresponding figure would have been £1.68 billion.
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.”
The Investec Business High 5 Account, which requires businesses to make a minimum deposit of £50,000, pays a market leading rate per week.
Every week the independent financial product research company Moneyfacts takes the five highest savings rates in the business savings market across the categories of no notice, 7, 30, 60, 90 and 90+ day notice accounts, find their mid-point and use this to set the rate for the Business High 5 Account.
The account, which has a three month notice period, does not rely on bonuses to inflate its rate. The current rate for the Business High 5 account is 2.25%3 Gross AER.