HBoS cuts costs for business

THE bank created by the merger of Halifax and Bank of Scotland,

Last week, the bank became the first to offer interest on current accounts for business customers. It will pay two% on balances of £1 or more. At the moment, HBoS has only three% of the market for small and medium businesses, but it aims to increase this to 6% by 2003.

About 30% of small businesses run overdrafts and would benefit from lower interest rates. All would gain from cheaper transaction charges.

Paying interest on current accounts to existing customers will cost HBoS £29m, but it is confident that it will recoup this by expanding its customer base.

High Street banks Lloyds TSB, NatWest, Barclays and HSBC have 83% of the market. But so far, none shows signs of following HBoS's example and paying interest to small business customers.

HBoS said: 'We already have a third of the market in Scotland and this will open up opportunities for us in England and Wales. The Big Four banks currently hold £30bn in their business current accounts and they could stand to lose £600m.

'People switch mortgages at the drop of a hat these days, so we should see a lot of business accounts being switched.' HBoS has received more than 6,000 enquiries about its current account for businesses.