With a storm of economic uncertainty looming on the horizon for UK businesses, all sizes of organisations are busy looking for a relatively safe savings harbour in which their deposits can wait things out.
At present there are a number of providers offering attractive terms and rates to business savers – not least in the fixed rate bonds market. Here competition has seen the gap between providers widen, with some pulling away to take a commanding lead. While we have seen similar jockeying for position in the personal savings sector - especially for fixed rate ISAs – business bonds are showing the largest difference between the best rates for savvy business savers.
Topping the short-term business fixed rate bonds chart currently is the 12-Month Fixed Term Deposit Account 1 from BFC Bank. With a tempting rate of 2.5% AER this bond requires a minimum deposit of £10,000, with interest being paid on maturity. Ideally placed for business savers who don't need access to their deposits for the period of this 12-month bond, the account can be managed by post or telephone with a maximum investment limit of £1 million.
The BFC Bank leads the way by some margin over their nearest rivals, Al Rayan Bank who are currently offering an AER of 2.17% (expected profit rate) for their 12-Month Fixed Bond. Al Rayan Bank, which operates under Islamic principles, do have the advantage of having a much smaller minimum deposit requirement of just £1,000. Profit is paid quarterly but again no withdrawals or access is allowed before the bond matures. In addition, there is no deposit maximum.
Still in the 2.0% + bracket is the ICICI Bank UK Fixed Deposit Account with a rate of 2.02%. While not paying to the same level as BFC Bank or Al Rayan Bank, the ICICI Bank UK bond offer the two attractive benefits of a minimum £1 investment and early access to business funds – the latter being subject to a 1.00% interest penalty.
The Union Bank of India (UK) Ltd follows the lead of these top three with advertised AER rate of 1.92% while Aldermore and United Trust bank are both offering a 1.85% fixed return.
For those interested in a variable rate business savings product, the returns are commensurately smaller than their fixed rate cousins with the top AER currently being offered by Al Rayan Bank at 1.51% (expected profit rate) for their 90-Day Notice Account. However, the advantage for business savers lies in the fact that access to your monies is much easier, with withdrawals being allowed subject to a 90-day notice period. Making this an even more attractive proposition is the low investment minimum of just £250 and the fact that the account can be managed traditionally in branch, online, by telephone and even post.
Currently occupying second and third places in terms of their advertised AER are the 90-Day Business Notice (Issue 11) account from Hampshire Trust Bank – offering 1.40% AER – and the 35-Day Business Savings Account (Issue 2) from the Redwood Bank with a 1.35% AER. In both cases withdrawals (subject to the notice period) are permitted, with minimum deposits of £5000 and £10,000 respectively.
While nothing stays the same in the constantly changing financial markets the above are great example of how competition between providers is driving the best deals during this period of economic uncertainty. If the business savings markets follows the same pattern as their personal savings equivalents we are likely to see more changes in AER and the continued jockeying for position amongst the marketplace players – All of which makes the outlook for business savers just a little bit sunnier.