Firms ‘waiting’ for banks to pass on rates cut

fate of healthy businesses depends on reaction from major lenders

By Keith Findlay

Published:

Scottish consumer and business groups piled on the pressure last night for banks to pass on the latest cut in the base rate in full.

Many of the major lenders were still holding back yesterday, including Abbey, Alliance and Leicester, and Northern Rock – all saying the situation was under review.

In Scotland, Clydesdale Bank was also reluctant to make any sudden move on its standard variable rate (SVR) mortgages.

Patience was wearing thin among consumer and business leaders.

A spokesman for consumer watchdog Consumer Focus Scotland said: “It is worrying that there does not seem to be enough real competition in retail banking, leading to some banks assuming customers will accept whatever is on offer.

“The tone of this is that the banks are hurting, so why shouldn’t consumers too.”

Graeme Brown, director of housing and homelessness charity Shelter Scotland, said: “We are dismayed at the sluggish response of some lenders, given that less than half have passed this cut on to their customers.

“We would urge all lenders to act immediately to pass it on. This would greatly benefit thousands of homeowners who are struggling with huge mortgage payments, rising fuel bills and the cost of Christmas.”

Andy Willox, the Aberdeen-based Scottish convener of the Federation of Small Businesses, said companies were “waiting in anticipation” for banks to pass on the whole 1% cut that was announced by the Bank of England on Thursday.

He added: “How the banks react to this will decide whether businesses – some of which are perfectly good, healthy, busy firms – get the fairness and respect they deserve to stay in business, provide goods and services, and maintain jobs.”

Mr Willox said time was running out and, if the banks did not swiftly pass on the cut, the UK Government should apply “further and meaningful” pressure.

CBI Scotland assistant director David Lonsdale said businesses were going through turbulent times and if the latest bumper interest rates cut was to have the desired impact, it was crucial for it to be passed on to commercial and domestic borrowers.

Scottish Chambers of Commerce chief executive Liz Cameron said: “Businesses have welcomed the Bank of England’s rate cuts. However, the benefits will only filter through to Scottish firms if our high-street banks act to pass on the full rate cut to their individual and business customers.”

Clydesdale Bank said it had 10 times more personal savings than lending accounts, so needed to consider the interests of all customers before making further changes.

“The full rate cut is automatically applied for business and mortgage customer tracking accounts,” a spokeswoman added.