With the Euro-zone crisis now firmly back in the news, there has been understandable concern in the UK’s Contractor community about its impact on finances closer to home.
It’s now clear that the package of measures implemented by the EU and ECB in the latter months of last year were only able to deliver a temporary respite for investors, savers and borrowers alike. In the past 3 weeks we have seen renewed fears of a disorderly Euro exit by the Greeks, who now have no government and face fresh elections that amount to a referendum on the Euro. We have also witnessed an austerity minded French president ousted from power and further evidence across Southern Europe that German imposed fiscal medicine may be killing the patients.
As a result of renewed questions about the long term viability of the European single currency, Freelancers have watched stock markets give up all of the substantial gains they made since the start the year and there have been serious concerns surrounding the financial strength of one of the most popular banking providers to the Contractor community, Cater Allen.
In addition to the anxiety felt by investors, borrowers have seen a return to the mortgage rationing last seen in the depths of the credit crunch, as UK lenders have been impacted by increasingly tight wholesale funding markets.
So where does all this leave Cater Allen?
Given the downgrading of Spain’s banking sector there has been obvious concern regarding the security of deposits held with that Contractor favourite, Cater Allen, which is owned by Santander.
The vast majority of Contractor businesses will, however, qualify for the small company criteria under the Financial Services Compensation Scheme
Fewer than 50 employees
Turnover of less than £6.5million
Balance sheet of no more than £3.26 million
As such up to £85000 of company money is protected in the event of a collapse of Cater Allen but to be safe Contractors should consider spreading anything over this amount across another institution.
We have had calls in recent weeks from Contractors who have asked for advice regarding additional monies with other Santander UK subsidiaries, concerned that only a single £85k safety net may apply across holdings with the whole group. Thankfully, whilst Cater Allen is a subsidiary of the Spanish banking giants Santander UK PLC arm, it does retain its own
independent banking licence and as such is covered by a separate Financial Services Compensation Scheme ceiling of £85k. So further company deposits across the old Abbey (Santander), Alliance and Leicester and Bradford and Bingley ranges are ring fenced from the Cater Allen money and qualify for an additional £85k guarantee.
It is an irony of the current crisis to hit European banks that, in the depths of the credit crunch, Santander was seen as a financially strong white knight riding to the rescue of stricken UK institutions Bradford and Bingley and Alliance and Leicester. However, after the recent downgrading of Spain’s banking sector, its UK subsidiaries now
have a higher credit rating than the parent company.
For investment advice please contact Andrew Gains or Catherine Young on 0845 062 8888 or alternatively you can contact them via email firstname.lastname@example.org
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