SME cash deposits surge 77% in 2025
Stubborn inflation, consistently constrained access to finance, and a recent Budget that hasn’t quelled concerns about rising rates, taxation and employee costs are encouraging more SMEs than ever to reassess how they manage their cash reserves and get the most from them.
In the 12 months to 30 November 2025, total cash directly deposited by UK SMEs onto Flagstone, the UK’s largest savings platform, increased by 77%, from £1.6bn to £2.9bn. 7,500 UK businesses now manage over £5bn on Flagstone’s cash savings platform – made up of deposits placed directly by businesses and those referred to Flagstone through introducers such as financial advisers.
What’s driving this growth?
Faced with an uncertain economic backdrop to grow, pivot or perhaps even sell their businesses, business leaders are increasingly turning to cash reserves for support. Industry research by Flagstone among 200 UK SMEs shows how these businesses have three key priorities when it comes to cash flow and cash reserves:
Protecting their cash against risk of bank failure
Many SMEs may be at risk of missing out on full Financial Services Compensation Scheme protection, as their cash is often held in a single bank account. Under FSCS rules, only up to £120,000 held with any one banking institution is protected in the event of a bank failure. Any cash above that threshold is not guaranteed.
Flagstone research reveals that two thirds (67%) of SMEs save their money with only one or two banks. Assuming that many of these companies have more than £240,000 in cash reserves, this would imply that a large proportion of UK SME’s cash may be unprotected. This issue would be particularly pronounced among larger SMEs: 99% of companies with £500,000 to £1m in cash hold their funds with four or less banks, indicating that as much as 52% of their cash reserves are unprotected.
Generating income from cash reserves
As access to finance remains limited to many, there’s a growing need for SMEs to explore alternative ways to generate additional income and manage costs. An effective way is to make the funds at their disposal work harder for them. Flagstone has found that 51% of SMEs save nearly all their cash with high street banks, a category of savings providers that routinely offers less competitive rates of return. A further 38% prefer a mix of challengers and high street banks. Data published by challenger bank and Flagstone partner, Allica, shows that SMEs are offered almost 3% higher savings rates by challenger banks versus high street alternatives. On a £100,000 deposit, the difference in rates can equate to nearly £3,000 difference in annual return.
Maintaining liquidity and access
A turbulent macroeconomic environment requires SMEs to remain nimble. Ensuring that cash reserves are readily available in part or in full is a crucial requirement of their financial plan. Allica also reports that 51% of SMEs’ total cash reserves (£264bn) is kept, in part for this reason, in current accounts, meaning it can be accessed immediately when needed. However, most business current accounts pay no interest, whereas a top performing easy access business savings account currently offers in excess of 4%.
Lakhbir Sandu, CFO of Flagstone comments: “Whilst the recent Budget did not throw many new and unexpected curveballs at UK SMEs, it also did not provide solutions to the problems these businesses are facing. Active management of cash reserves is going to be even more essential in 2026, building on the momentum we have seen in the last year alone. More SMEs need to make sure their money is secure, it’s working as hard as it can for them, and it’s liquid enough to access when needed.”
Sandhu adds: “Time-poor, pressured SME leaders are crying out for solutions that make financial management easier and more lucrative. The appeal of convenient, time-efficient and protected cash management – that cash platforms provide – is spreading fast among UK SMEs.