Interest for savers slashed to just 0.1%

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Interest for savers slashed to just 0.1%

Banks and buildings societies have silently slashed savings rates over the holidays, with many accounts returning a penny in the pound or 0.1% interest.

Lloyds TSB, Halifax, Santander, Barclays, Alliance and Leicester, NatWest, Nationwide and Royal Bank of Scotland all reduced their rates on variable interest accounts.

Egg and Yorkshire Building Society have withdrawn fixed rate offers over the holidays.

Savers with £5,000 in a savings account paying 0.1% will pick up £50 interest per year – with £10 income tax deducted at source reducing the pay out to just £40.

“It’s bleak for all savers, and pensioners in particular,” said Ben Yearsley, an investment manager with advisory firm Hargreaves Lansdown. “We’ve reached a point where savings rates are lower than the rate of inflation.”

Individual Savings Account (ISA) rates are down too – as Halifax, Santander, and Lloyds TSB have reduced cash ISA rates by 1%.

The Bank of England’s monthly interest rate setting meeting later this week is expected to lop at least a further 0.5% of rates, pushing the bank lending rate down to 1.5%, although some pundits believe the rate will follow the US cut to 1% or less.

Waterford Wedgewood goes in to administration

Waterford Wedgwood, the upmarket glassware and china maker, has gone in to administration after failing to secure new funding.

Famous for Waterford Crystal and Royal Doulton, the company has failed to raise up to £200m in fresh capital. Deloitte will be appointed as receiver and administrator.

Waterford Wedgwood employs about 1,000 people at Barlaston, Staffordshire, and 200 people at Waterford, Ireland. Wedgewood has traded for 250 years, but has had profits eroded by cheap imports and is one of the last in a long line of pottery firms to face trading problems in Staffordshire.

Principles, Karen Millen and Oasis cash fears

Fashion chains Oasis, Warehouse, Karen Millen and Principles, all owned by the Mosaic, are in dire straits over cash flow after poor Christmas trading.

Before Christmas, Mosaic made clear how bad the situation was for the group, which operates through more than 2,000 shops employing 13,000 staff. Mosaic is paying interest only on debts of more than £400 million to Icelandic investor Kaupthing. The company fears Kaupthing will call in the loan, giving them a controlling stake.

Kaupthing also has a major stake in Harrods owner and department store chain House of Fraser.

"It is the worst run-up to Christmas we have ever experienced. The likelihood is that there is too little time left for the majority of retailers to make up the shortfall from the past two months," said a Mosaic spokesman.

Markets

On the first day of trading in the New Year, the FTSE 100 finished up 128.6 at 4561.8 from 4434.2 and in New York, the DOW gained 262.44 points to end the day at 9034.69 from 8772.25.

The pound was steady – up a cent from $1.45 to $1.46 against the US dollar and shifting from 1.032 to 1.047 against the Euro.