This development follows Lightyear’s release of an analysis based on recent Bank of England data. The analysis highlights the substantial increase in cash holdings by British businesses, which now approach GBP 500 billion, while the majority of these funds earn minimal interest.
The analysis also shows that the total cash held by businesses has been growing since 2008 and has recently surpassed the amount of credit available to businesses. As of May 2024, businesses hold GBP 562 billion in deposits compared to GBP 449 billion in credit. Despite this large cash reserve, GBP 426 billion (76%) of it is kept in savings or current accounts with an average interest rate of only 1.7%.
This situation persists even though the Bank of England’s base rate stands at 5.25%. Lightyear’s new business accounts are designed to address this issue by offering higher interest rates. The company’s treasury product provides an annual equivalent rate (AER) of 5.14% for GBP, 5.38% for USD, and 3.60% for EUR. These rates are available through Money Market Funds (MMFs) managed by BlackRock, which are typically reserved for large corporations.
Fees and other details
It’s worth noting that Lightyear’s business accounts come with no minimum deposit requirement and no account management fees. However, the platform charges a flat fee of 0.25%. Lightyear also provides businesses with access to over 3,500 international stocks and ETFs across the US, UK, and Europe. The company’s goal is to offer smaller businesses a competitive alternative to traditional banking options.
In the company press release, representatives from Lightyear commented on the new service, emphasising the importance of addressing the low-interest rates currently earned on business savings. They also pointed out that while much attention is given to financing challenges faced by SMEs, the issue of low returns on business cash has not been sufficiently addressed.
