Metro Bank has this week received the largest of three cash awards from RBS, as part of a £775m scheme which is designed to improve competition in the business banking sector.
In 2008/2009, the UK Government bailed out The Royal Bank of Scotland Group plc to the tune of £45bn. This was granted on the basis that RBS would commit to improving competition in the business banking sector.
RBS originally planned to move certain customers to a new bank called Williams & Glyn - which some of RBS’s more long-standing clients may remember.
However, when plans fell through, the alternative remedy - the ‘Business Banking Switch’ proposal - was approved by the European Commission in 2017, a £775m scheme which is part of the conditions attached to the Government bailout.
Over 70% of small and medium-sized enterprise (SME) current accounts are currently held with the big four banks (Royal Bank of Scotland / NatWest, HSBC, Lloyds and Barclays), which is why the Government is keen to increase competition and provide more choice for customers.
There are two pots of cash;
- A £425m Capability and Innovation Fund that will grant funding to a range of competitors in the UK banking and financial technology sectors, to help them to develop their business banking capabilities.
- A £350m Business Banking Switch scheme provides funding for participating banks to offer a cash incentive to eligible SME customers to switch their business current accounts and loans from Royal Bank of Scotland/NatWest. The aim is to get 200,000 RBS and NatWest business customers to switch to other banks.
So far Metro Bank has received £120m from the Capability and Innovation Fund and has committed to add a further £240m of its own investment in order to open a further 30 branches in the North of the UK. It is great to see a bank which is still committed to opening branches benefitting from an award like this.
The other banks that have so far received a payment from this fund are Starling Bank and ClearBank, being awarded £100m and £60 respectively.
Business Banking Switch incentives are only available to certain business and commercial customers, with a turnover of £25 million or less at an individual company level, who were due to move to Williams & Glyn. You should know if you’re able to take part, as you would have been contacted by RBS/NatWest about it already.
However, even if you are not eligible, it could be time to take stock of any working capital you have languishing with your bank. High street banks pay some of the worst savings rates of interest, even if you move your cash from your business bank account into a dedicated business savings account with your current account provider.
For example, Lloyds Bank is paying just 0.05% on balances of up to £99,999 on its Business Instant Access account – increasing to 0.10% on balances of £100,000 to £999,999 for businesses with a turnover of £3m or more.
On the other hand, Virgin Money’s Business Access Savings Account Issue 2 is paying 1.01%.
On a balance of £85,000, by switching you could earn £858.50 per year rather than £42.50.
And if your business can afford not to have immediate access to some of the funds, you could earn even more. Redwood Bank has a 35 day notice account paying 1.35%* and BFC Bank offers a 12 month fixed rate bond available to Limited Companies, paying 2.50% gross/AER*.
Take a look at our Business Best Buy Tables for more information or for help finding and opening the best business savings accounts, call our savings experts on 0800 011 9705. We’d love to help your business earn more.
*We are occasionally paid by some providers if you click through from our Best Buy Tables and open a savings or current account with them. We will never accept a payment that compromises in any way our independent, whole of market approach to providing information on savings products. For clarity we will indicate those companies who remunerate us with an asterisk (*).
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