New research from pricing strategy specialists Simon-Kucher (www.simon-kucher.com) shows that if the Bank of England decides to cut base rates this week, the big losers will be savers and businesses with surplus liquidity in the form of bank deposits, and the banks themselves, which stand to lose £1.2bn in annual profits.

Hrishi Rajadhyaksha, a director with the Financial Services practice at Simon-Kucher, notes: “A rate cut of 0.25% would see the top ten UK lenders losing £1.2bn in annual pre-tax profits from lower net interest income, as well as being bad news for savers and businesses with funds on deposit. Of course, bad news for the banks’ profits is bad news for the millions of people who own them, whether directly through shares or indirectly through their pension funds. By contrast people with large variable mortgages will be the winners.

“If the base rate is cut, we expect to see banks pass it on right away wherever possible. Savers with instant access deposits and corporates will feel the reduction immediately, although for many interest rates are so low they may barely notice: currently someone with £20,000 of savings will lose just £20 a year from the change because they are currently earning the somewhat measly sum of £100 per year interest on it.”

Key findings from Simon-Kucher’s analysis includes: