The latest figures from the British Bankers’ Association show that at the end of June this year cash held in business current and savings accounts totalled £157bn. This represents a 9 per cent increase on the same period last year.
This is no insignificant sum. Many SMEs rely on these savings for cash flow, as well as other items such as wages or taxes. The figures also reveal that just under £90bn is held in current accounts with the remaining £67 billion in deposit accounts. Bearing in mind most business current accounts do not pay interest and carry a monthly fee, SMEs are missing out on millions in interest by not keeping their money in a business savings account.
Aldermore recently conducted research into the savings habits of more than 1,000 small and medium-sized businesses across Britain and came across some interesting insights.
Almost a quarter of those surveyed admit they currently receive no interest, while another quarter told us they didn’t know what rate they were receiving. Nearly one in three said they receive between 0.01 and 0.5 per cent. The average rate SMEs received on their savings was 0.59 per cent. One only has to look at the best buy tables to see what they’re missing out on.
Are SMEs shopping around? It seems not. While 62 per cent review their savings accounts at least once a year, they don’t appear to be moving their money. I can understand that for many SMEs, optimising returns on their savings is low on their list of priorities compared to the day-to-day demands of what they do, particularly in an environment when the Bank of England base rate remains at a record low. However there are significant gains to be made, especially when considering the available rates across the market.
Perhaps it is telling that a previous piece of research we conducted in late 2014 revealed that 91 per cent of businesses with a business savings account hold it at the same bank as their business current account. There is certainly a degree of apathy, although SMEs aren’t helped by banks who do little to make it easy to find simple information such as the interest rates being earned on savings accounts.
If I can give SMEs one piece of advice, it would be to review the rate of interest they are currently receiving on any surplus funds they hold. Shopping around has never been easier and it’s time that SMEs were given the banking services they want and deserve.