SMEs hit by £9 billion in lost interest, research reveals

Research for the 2024 update of the Great British Savings Squeeze has revealed that small and medium-sized enterprises (SMEs) across the UK are missing out on a staggering £9 billion in savings interest, a sharp rise from £7.5 billion last year. This significant shortfall is due to SMEs being offered much lower savings rates than large corporations and billions of pounds sitting idle in zero-interest accounts.

The report, backed by Allica Bank in collaboration with the Federation of Small Businesses (FSB), Institute of Directors (IoD), and the British Independent Retailers Association (Bira), highlights the worsening impact of a two-tier business savings system, where SMEs are penalised with disproportionately low interest rates.

SMEs hold an estimated £248 billion in savings across various accounts:

• £126 billion of this is languishing in current accounts that offer zero interest, costing SMEs £5.45 billion in lost returns.
• The remaining £122 billion is kept in interest-bearing accounts, but these accounts offer 3% lower rates than those available to large corporations, resulting in £3.58 billion in missed interest.

The widening gap in interest rates is exacerbating the problem. Over the past year, the rate difference between what big banks offer large corporate customers and SMEs has grown from 2% to 3%, despite the Bank of England’s efforts to raise interest rates. This disparity means SMEs are increasingly missing out on potential income, further tightening the financial pressures on small businesses already grappling with inflation, rising operational costs, and economic uncertainty.

Allica Bank, together with the FSB, IoD, and Bira, is calling for an immediate investigation into the business savings market. The campaign seeks to push the government and regulators to address the growing inequalities and ensure that SMEs receive fairer treatment in the savings market.

The Great British Savings Squeeze campaign encourages SMEs and the public to support its call for change by signing a petition at savingssqueeze.com. The campaign aims to ensure that regulators and policymakers address the imbalance in interest rates and provide a level playing field for SMEs.