By David Prosser
Where now for interest rates – and therefore the savings rates available on cash accounts? The short answer is that in a volatile world, the outlook for interest rates is harder than ever to predict. But there are steps that businesses, charities and other organisations can take to protect their savings from this uncertainty.
It’s worth reflecting on how we’ve reached this point. For much of the 2010s, in the wake of the global financial crisis, the Bank of England’s Monetary Policy Committee (MPC) kept base rates close to zero, as policymakers sought to protect the economy and households from the economic aftershocks. That approach continued during 2020 and 2021, in the face of the Covid-19 pandemic.
Then, in 2022, the MPC started to raise rates, as concern about inflation gathered pace. The base rate rose from just 0.25% at the beginning of that year to a peak of 5.25% by August 2023. Thereafter, with inflation falling sharply, the MPC felt able to relax its approach and once again began to trim rates – they fell to 3.75% by the end of last year.
Coming into 2026, many economists expected the MPC to cut rates further. But that was before war broke out between the USA, Israel and Iran. As the conflict sent oil and gas prices soaring, policymakers worried about a broader spike in inflation, both in the UK and internationally. Plans for rate cuts were reconsidered; rather, the MPC began to signal that increases might be necessary.
At the crossroads
Fast forward to today and base rates remain at 3.75% despite inflation now creeping above 3.1% in August. The Bank of England is also conscious of the slow economic growth predicted for many developed economies – not least due to the war – and is keen not to add to the challenges facing the UK.
Nevertheless, the Bank of England expected inflation to rise during the second half of the year, and says this might prompt interest rate increases. In the gilt markets, where investors price bonds issued by the government according to their expectations of future interest rate policy, the current level of yields suggests the market is expecting at least one base rate increase before the end of 2026.
However, bond market expectations are not an infallible guide to the future, particularly at times such as now when there are so many big unknowns. It’s almost impossible to know, for example, how long the Middle East conflict will continue. An early and enduring resolution to the crisis would have a significant impact, with energy prices likely to fall, and inflation easing accordingly.
Another big question mark surrounds the direction of UK economic policy under the new Prime Minister. Some analysts expect Andy Burnham and Chancellor John Healy to take a more relaxed approach to borrowing and spending. If October’s Budget includes a large increase in spending, economists fear that could push up inflation making an interest rate increase more likely.
Against this backdrop, making predictions about future interest rate movements is fraught with difficulty. Views are mixed on whether rates will rise in the months ahead, but that view could change quickly, depending on any number of domestic and international factors.
How savers should prepare
For businesses, charities and other organisations with cash in savings accounts, such uncertainty makes planning ahead difficult. How do they make sure they get the best possible deal on their savings?
The first point to make is a positive one: right now, organisations prepared to shop around for good savings deals can earn attractive rates of interest that are ahead of inflation. That ensures their savings are growing in real terms, rather than rising prices eroding their value.
United Trust Bank, for example, offers savings rates starting at 3.5% Gross/AER variable* on easy access accounts – rising to up to 4.82% Gross/AER on accounts where organisations are prepared to leave their money alone for a fixed term.
Broadly speaking, the savings rates on offer right now reflect expectations of future interest rate movements. For example, United Trust Bank currently offers 3.85% Gross/AER variable on its Business 3 Month Bond. For businesses prepared to commit funds for longer periods, rates increase to 4.82% Gross/AER fixed on the Business 1 Year Bond and 4.7% Gross AER on the Business 5 Year Bond, a best buy in the market at the time this was written (full products details can be found at the end of the article).
For organisations prepared to commit to tying up their money for a period, these fixed deals are worth looking at for the certainty of the rate. Alternatively, easy access accounts with variable rates might deliver better returns if the MPC takes a more aggressive approach.
With different options available, creating a portfolio of accounts is well worth consideration. Organisations don’t have to pick a single account for all their savings. A competitive easy access account may be suitable for cash savings that organisations may need to dip into in the short term. They could then deposit the rest of their money in one or more fixed-term or notice accounts paying better rates.
Another option is a tracker account, paying an interest rate that automatically follows the Bank’s base rate up and down. United Trust Bank’s Business Easy Access Tracker account, for example, currently offers 3.9% Gross/AER variable a year, including an introductory bonus of 0.9% payable for the first 12 months after the account is opened. That rate will track base rates, with savers benefitting accordingly if rate rises do come through but will of course see their rate reduce if base rate comes down.
Stay vigilant
There’s no perfect solution in the current interest rate environment. Every organisation will have to consider its own situation – including the value of cash savings and when they might be needed – before deciding where to hold this money to maximise returns.
However, amid so much volatility, it’s especially important to keep this question under review. There are a good number of excellent savings accounts available to a wide variety of organisations – but the picture is changing constantly, as the economic and political backdrop shifts. To make the most of their savings, every organisation should be checking their options regularly.
Important information
Product information (correct at time of publication)
| Product | Gross/AER | Fixed/Variable | Minimum Deposit |
Maximum Balance |
|---|---|---|---|---|
| Business Easy Access Account | 3.50% | Variable | £5,000 | £3,000,000 |
| Business 3 Month Bond | 3.85% | Variable | £5,000 | £5,000,000 |
| Business 1 Year Bond | 4.82% | Fixed | £5,000 | £5,000,000 |
| Business 18 Month Bond | 4.45% | Fixed | £5,000 | £5,000,000 |
| Business 5 Year Bond | 4.70% | Fixed | £5,000 | £5,000,000 |
| Business Easy Access Tracker Account* | 3.90% | Variable | £5,000 | £100,000 |
Savings rates are subject to change and may fall as well as rise. Tracker rates can move down as well as up in line with the underlying reference rate. Any introductory or bonus rates are available only for the stated promotional period and will expire at the end of that term. Products may be withdrawn, amended or replaced without notice. Eligibility criteria, account terms and conditions apply.
*AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year. Gross is the interest rate without the deduction of income tax. Interest is paid gross into your account.
United Trust Bank (UTB) has an independent banking license and we are not affiliated with any other banks or building societies. This means that our eligible customers benefit from the full protection provided by the government backed Financial Services Compensation Scheme (FSCS) which protects savers in the event of a bank’s failure. The FSCS protects the first £120,000 of any savings an eligible account holder has deposited with a bank or building society. For joint accounts, each eligible account holder benefits from the same £120,000 of protection. This means that two eligible joint account holders can claim up to £240,000 between them.
Although this article may contain helpful information and tips, this is not advice. You may wish to seek advice from a financial advisor if you are unsure about next steps. Any views expressed in this article are those of the authors not United Trust Bank.