The Rate Environment, Refreshed
The April piece anchored the analysis at approximately 3.75 to 4.0 per cent. Since then, the MPC has cut in May and again in June by 25 basis points each, bringing the base rate to 3.25 per cent. Market-implied terminal rate expectations have edged down as well, with the forward curve now pricing a terminal in the 2.75 to 3.0 per cent range by end of 2026.
Two implications drive the working capital story. First, corporate cash yield has compressed further: a company holding £10 million in short-duration instruments is now earning approximately £310,000 per annum, down from £340,000 in April and £500,000 at the mid-2024 peak. Second, floating-rate debt has become materially cheaper. An RCF priced at SONIA + 250bps is now costing approximately 5.75 per cent all-in, down from 6.25 per cent in April.
DSO Discipline in a Lower-Rate World
Days Sales Outstanding matters less at 3.25 per cent than at 5.25 per cent, but it still matters. The cost of extending 30 additional days of credit on a £500,000 monthly invoice is approximately £1,300 in funding cost at current rates, versus £2,200 at the peak. The number is smaller but not trivial for a growth-stage company with margin pressure.
Two shifts in customer behaviour are worth flagging for June 2026:
Enterprise Customers Are Pushing Terms Out
Larger enterprise customers, particularly in traditional financial services, have started pushing standard payment terms from 30 or 45 days to 60 days. This is not universal, but it is a market pattern. The rationale on the customer side is straightforward: their own cost of funds has fallen, but their working capital teams still have DPO targets. If your standard terms have historically been "net 30", expect pushback on renewal. Options: hold the line and accept longer sales cycles, offer an early-pay discount, or grade the terms by customer tier.
SME Customers Are Paying Faster
Counter-intuitively, SME customers have improved payment discipline through H1 2026. The falling rate environment has eased their own cashflow, and many are catching up on the payment backlog that accumulated in 2023 to 2024. If your DSO on the SME segment has drifted, June is a good month to run collection focus — the environment is temporarily supportive of catch-up.
DPO and Supplier Pushback
The supplier side has moved as well. Suppliers who accepted lengthened payment terms in the peak-rate environment (2023 to 2024) are now, in June 2026, pushing back for shorter terms. Two dynamics are in play:
- SCF programme unwind. Supply chain finance programmes that were attractive at 5.25 per cent base rate are now less compelling. Some suppliers are opting out and instead pressing for shorter primary terms. If you rely on SCF to keep DPO extended, expect programme participation to fall.
- Invoice financing supply loosening. Suppliers who previously financed their own receivables through invoice discounting are finding cheaper facilities as SONIA falls. This gives them more room to accept longer payment terms without pushing back, but it is a segment-by-segment picture.
The net effect is that the working capital advantage from extended DPO is compressing, but selectively. Larger suppliers with better access to cheap financing are still willing; smaller suppliers dependent on SCF are pushing back. Review the top 20 supplier terms explicitly for the year-end negotiation cycle.
RCF Utilisation: The Repriced Trade-Off
The April piece flagged that RCF utilisation should be recalibrated as facility cost fell. At June 2026 SONIA + 250 pricing (approximately 5.75 per cent all-in), the RCF is a cheaper source of working capital funding than it has been at any point since 2022. The specific implication: the excess-cash buffer that most CFOs maintained to avoid drawing an expensive facility is now over-sized.
The revised calibration for a growth-stage fintech is:
The reduction in tactical and strategic reserves reflects the fact that the RCF has become a viable substitute for cash-on-balance-sheet at current pricing. The freed cash can be returned to operations, dividended to shareholders, or repositioned into higher-return uses. The RCF headroom target falls because more of it becomes drawn against working capital swings.
"At 3.25 per cent base rate, the RCF is no longer an expensive last resort. It is the cheapest working capital instrument on most balance sheets. The CFO who is still running the 2023 excess-cash buffer strategy is over-insuring against a cost that has halved."
Inventory and Prepayment Positions
For companies with physical inventory or material prepayment positions (SaaS annual prepayments, vendor deposits), the falling rate environment changes the economics of stock or prepayment size.
Two specific moves are worth considering in June 2026:
- Reduce safety stock modestly. The cost of holding inventory has fallen as funding cost has fallen. But so has the opportunity cost of not deploying that cash elsewhere. For most companies the net effect is a small reduction in optimal safety stock (10 to 15 per cent) rather than a large re-optimisation.
- Reassess annual prepayment discounts. Software vendors offering "pay annually and save 10 per cent" are effectively selling you a 10 per cent yield on prepaid cash. At 3.25 per cent BoE, that discount is more attractive than it was at 5.25 per cent (where you were opportunity-cost-ing a 5 per cent yield to capture 10 per cent, versus opportunity-cost-ing 3.25 per cent now). Refresh your vendor prepayment decisions.
June 2026 Working Capital Action List
Concrete items to run through in the June close cycle:
- Reforecast interest income at 3.25 per cent and 2.75 per cent. Both to show board sensitivity. If your model still assumes 3.75 per cent, the interest income line is now overstated by approximately 15 per cent per £10 million of cash held.
- Review DSO by customer tier. Enterprise terms are moving to 60 days; SME terms are catching up. Run collection focus on the SME backlog while the environment supports it.
- Refresh top-20 supplier terms. Note where SCF programme participation is falling, where DPO can still be extended, and where the negotiation has moved against you.
- Recalibrate cash tranche sizing. If tactical and strategic reserves have not been reduced since April, they are over-sized for the current RCF cost.
- Refresh vendor annual-prepayment decisions. The 10 per cent annual discount is worth more at 3.25 per cent than it was at 5.25 per cent.
- Update board pack working-capital scenario. Include the sensitivity of cash conversion cycle to a further 50bps of rate cuts.
Key Takeaways
- The BoE has cut twice more since April, bringing the base rate to 3.25 per cent. Terminal rate expectations have edged down to 2.75 to 3.0 per cent by end of 2026.
- Corporate cash yield on a £10 million short-duration position has fallen to approximately £310,000 per annum, down from £500,000 at the mid-2024 peak.
- RCF pricing at SONIA + 250 is now approximately 5.75 per cent all-in, down from 7.5 per cent at peak. Excess-cash buffers held to avoid RCF draws should be reduced.
- Enterprise customers are pushing terms from 30 to 60 days; SME customers are paying faster. Adjust DSO discipline and collection focus accordingly.
- Supply chain finance programme participation is falling as suppliers find cheaper primary financing. Reassess top-20 supplier terms in the year-end negotiation cycle.
- Cash tranche sizing should be reduced 15 to 20 per cent from April targets, freeing cash for operational deployment or shareholder return.
- Reforecast interest income at 3.25 per cent and 2.75 per cent for the H2 board pack. If the current model still assumes April rates, the interest income line is overstated.