SME customers losing out on £2,157 of extra interest each year

When banking with one of the UK’s ‘big six’ banks, SMEs with a balance of £75,000 are losing out on £2,157 of additional interest a year – each.
This works out at £180 a month in extra cash.

Average SME savings rates from the big banks are the lowest they’ve been since August 2023, while challenger banks continue to offer strong rates to SMEs.

The gap in business savings rates offered by challenger banks vs those offered by big banks remains at nearly 3%.

SMEs banking with the UK’s biggest banks are being shortchanged on their savings interest – to the tune of £2,157 a year.

An independent tracker which monitors interest rates offered to small and medium-sized businesses has shown that British high street banks are still offering an average rate of just 1.45% to small business on their savings.

This is the lowest average savings rate seen in this market since August 2023, when rates were sitting at 1.29%.

In comparison, challenger banks today are offering rates of up to 4.33% on the same cash.

This means that the average SME with £75,000 of savings who is banking with one of the big banks is missing out on nearly £2,160 a year in extra interest.

There are many established SMEs across the UK who have much more than £75,000 saved with their bank. For these businesses, the cost of keeping cash in a low interest account is significant. For example, a business with £1 million in surplus cash would be missing out on a staggering £28,760 annually.

While for smaller businesses who are feeling the pinch, this extra cash might just help them to survive a difficult period.

Allica Bank – which carried out the research – is calling for a shake-up of the business savings market and wants to spread the word about big banks neglecting Britain’s SMEs.

The firm is calling on the government and regulators to force big banks to notify their SME customers of the top rates in the market and where they can be found.

This will increase transparency in the market, encourage competition, and help small businesses to make the most out of their hard-earned savings.

Allica’s SME Monthly Savings Tracker monitors the average savings rates offered by big banks compared to the savings interest rates offered by challenger banks for comparable SME savings products.

It has shown a continued and significant gap between the rates SMEs are offered by challenger banks and their larger, incumbent competitors.

This data underpins the bank’s previous research, which found that SMEs are due more than £7.5 billion in ‘missing’ savings interest per year, with big banks offering much lower interest rates to smaller firms compared to large companies, and in many cases offering smaller firms no interest at all on their savings.

This growing discrepancy in the rates offered is occurring despite the Bank of England Base Rate remaining steady at 5.25% for almost a year.

Richard Davies, CEO of Allica Bank, said: “Allica’s goal is to help SMEs succeed and make the most of their hard-earned cash, which is why we are calling for a shake-up to the business savings market. It’s a tough time to be an SME in the UK and the last thing small business owners need is to be shortchanged on their savings – many without even knowing it.

“Our Monthly Savings Tracker measures the extent to which SMEs are being ripped off on their savings. We hope that by continuing to track and spread the word we can help change things for the better and get SMEs the banking they deserve.”

The research tracks the top rates offered every month by the challenger banks and contrasts it against those rates offered by the six largest incumbent providers in the UK – Barclays, HSBC, Lloyds, Nationwide, NatWest and Santander.

Allica Bank has long been calling on the wider banking industry to give small businesses a better deal on their savings, allowing this money to be pumped back into local economies. The firm recently wrote to the Treasury Select Committee (TSC) asking MPs to investigate the lack of transparency in the business savings market and has since launched a campaign – The Great British Savings Squeeze – to tackle the issue, which has seen support from the FSB, IoD and other leading industry bodies. It is calling for people to sign its petition.

Allica is the UK’s only full-service bank solely focussed on established SMEs. It is the UK’s fastest-growing company over the past three years and is the UK’s fastest-growing fintech ever.