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With some forecasts pointing to multiple rate cuts through 2026, UK businesses are reassessing whether locking cash away still makes sense.
With inflation easing and central banks signalling a more accommodative stance, attention is increasingly turning to the likely direction of interest rates through 2026.
Some forecasts now point to as many as three further rate reductions over the next year.
While the precise timing remains uncertain, the direction of travel feels clearer than it has for some time. (📍I am here to assist with a no-obligation consultation on how we can put your business’s cash pile to work, you can sign up here.)
For UK businesses, this matters less as a macroeconomic talking point and more as a practical cash-management challenge.
The forwards curve shows the market is expecting close to two more Bank Rate reductions.
In particular, it forces a reassessment of a question many finance teams have become comfortable answering in recent years: should surplus cash be locked away for term, or kept instantly accessible?
In a rising or high-rate environment, term deposits are easy to justify.
Rates reward commitment, and locking money away for six or twelve months provides certainty and predictability. For businesses with stable cash flows, the trade-off between access and yield feels rational.
But as expectations shift and rate cuts move from theoretical to probable, that equation starts to change. (🔍 I am available to personally assist you on how the outlook will impact your business specifically, get in touch with me here.)
In a falling-rate outlook, the value of optionality increases. Committing cash based on today’s rates may still look attractive, but it reduces the ability to respond as conditions evolve.
Whether that response involves refinancing debt, funding growth, managing working-capital pressure or simply accessing better pricing elsewhere, term deposits limit choice.
That limitation becomes more material when rates are expected to move down rather than up.
Instant access accounts, by contrast, rarely offer the highest available yield at any given moment. What they offer instead is flexibility. Cash remains available to be redeployed, restructured or reallocated without penalty.
In a falling-rate environment, that flexibility can outweigh the incremental return available from term.
It allows finance teams to act deliberately rather than defensively, particularly when margins remain tight and economic signals are mixed.
This is not a binary decision. Very few businesses should be entirely committed to term deposits or wholly reliant on instant access. The real challenge is segmentation: understanding what cash is genuinely surplus, what is operationally required, and what sits somewhere in between.
As rates edge lower through 2026, the businesses that navigate the period best are unlikely to be those that simply chased the highest available rate at a single point in time. They will be the ones that aligned cash decisions with flexibility, liquidity and forward planning.
The question is no longer just “What does this pay today?”, it is “What does this allow us to do tomorrow?”.
