Latest Monthly Bank of England Report : No Joy for UK Bank’s Business Customers
Latest Monthly Bank of England Report : No Joy for UK Bank’s Business Customers
August 2025
The latest Bank of England Statistical Release on effective interest rates covers the period up to 31st June 2025.
Despite predictions, the Bank of England rate has reduced more slowly than expected. The next meeting of the Monetary Policy Committee is on Thursday 7th August 2025 at which it is anticipated the rate will be reduced from 4.25% to 4.00%.
This will have a small impact on the UK bank’s business customers, more so for borrowers whose rates move more in line with market rates but not customers with bank funds who overall have been lazy with their money and not chased higher rates since market rates started rising rapidly in 2023 and 2024.
For UK businesses that are faced with multiple challenges this hurts their profit margins. At 2.25% in June effective rates on short term deposits ‘sight deposits’ are well below the Bank of England Rate which was reduced to 4.25% on 7th May 2025.
It shows a continuation of the pattern for this year that small movements in short term market interest rates are feeding through to the banks customers but with the banks retaining chunky margins.
Effective interest rates for: PNFC’s on stock outstanding of deposits and loans:
PNFCs deposits and loans
A PNFC is a private non-financial corporation.
The statistics confirm Bankhawk corporate benchmarks and show that most businesses have legacy banking arrangements and accordingly do not benefit from the higher market interest rates of the past couple of years. Those that have bank borrowings have higher interest costs but those that have cash at bank lose more interest margin.
Key Insights from the Latest Data
The Bank of England’s effective interest rates for June, published on 29th July 2025 reveal a modest rise across various deposit and loan categories:
- Sight Deposits: Rates decreased from 2.29% in May to 2.25% in June. This return remains well below the level corporate customers could achieve through more competitive arrangements.
- Time Deposits: Rates fell from 3.81% to 3.73%, reflecting anticipated declines in market rates.
- Loans: Effective rates dropped marginally from 6.18% to 6.17%, indicating lower borrowing costs for businesses. These rates remain high which will be a concern for companies with high borrowings.
The net interest margin for banks remains elevated. Businesses with legacy banking structures are not benefitting from the higher interest rate environment generally.
The gap between the returns businesses receive on bank funds and the rates they pay on borrowings underscores the need for proactive financial management. Companies actively reviewing and renegotiating their banking relationships achieve significantly better outcomes.
Legacy banking arrangements are hindering the capability of businesses to optimise their effective interest margins. This is very evident from data for those Bankhawk customers who continue to use the traditional UK banks.
Outstanding facilities
- The effective rate for sight deposits decreased by 0.04% from 2.29% in May to 2.25% in June.
- The effective rate for time decreased by 0.08% from 3.81% in May to 3.73% in June.
- The effective rate for loans decreased by 0.01% from 6.18% in May to 6.17% in June.
Effective interest rates for: PNFC’s on new deposits and loans:
New business
- The effective rate for time deposits decreased by 0.03% from 3.77% in May to 3.74% in June.
- The effective rate for loans increased by 0.34% from 5.60% in May to 5.94% in June.
Table: Effective Interest Rates paid/received on PNFC balances by UK MFI’s (excluding Central Bank)
Per cent – Not seasonally adjusted
Source: Bank of England – Statistics – Published July 2025
