SMEs missing out on billions in savings interest annually
Allica Bank is calling for greater transparency and focus on savings rates for small businesses
SMEs are losing out on £7.5bn in savings interest every year, according to Allica Bank research.
The company, which focuses specifically on serving small businesses, is calling on the banking industry as a whole to give SMEs “a better deal” as the cost-of-living and cost-of-business crisis continues.
According to Allica, SMEs have £150bn in deposits sitting in accounts that offer no interest, and £125bn in interest-bearing accounts with comparatively worse rates than those offered to large companies.
The average difference between interest rates offered to large companies and those offered to SMEs is more than 2 per cent, which Allica pins to banks “exploiting the lack of transparency in the market”.
“Sadly, despite [established SMEs] being the engine room of the economy, contributing a third of GDP, they have been neglected for too long and business banking is increasingly impersonal, inconvenient and poor value,” Allica Bank CEO Richard Davies said.
“Our research shows this is particularly true for SME savings, where SMEs are getting a raw deal with the big banks — it’s a scandal they’re missing out on more than £7.5bn of interest on their hard-earned cash every year.”
He added that Allica is determined to drive change in the market, saying, “Britain’s established businesses deserve better”.
The bank has sent a letter to Harriet Baldwin MP, chair of the Treasury Select Committee, calling on the Committee to look more closely at the UK’s business savings market to ensure banks are doing their “level best” to pass on interest rate rises to smaller firms.
It also called for fair treatment for small businesses compared to larger companies, greater transparency in SME savings and the consideration of raising the Financial Services Compensation Scheme limits to £250,000 for small firms, alleviating potential fears of holding large balances with one bank.