Companies dip into cash savings to pay for debt

WELL over a third of companies with annual sales of £1 million or more withdrew a "staggering" £2.43 billion from their deposit accounts to help pay off higher interest rates on their debts, new research shows.

City bank Investec revealed yesterday that the average withdrawals made by 36 per cent of companies surveyed who had done this was 35,270.

The bank said 4 per cent of businesses had withdrawn 100,000 or more from their deposit accounts to help pay off interest in the tough climate for middle-rank companies.

Jack Jones, who produced the research, said: "Many companies are receiving paltry returns on their savings, and some have clearly decided to use the money to pay the more expensive interest on their debts."

Jones said this was "perhaps not surprising" when in September about one in three deposit accounts targeted at businesses were offering 0.1 per cent or less gross annual equivalent rate on balances of 50,000.