Less than a third of small and medium-sized businesses have a savings account
Less than a third (31%) of Small and Medium-sized Enterprises (SMEs) in Britain have a business savings account, according to research released by Aldermore.
The research titled Saving SMEs (which can be found here, with infographic) also found that in addition to only a minority of SMEs having a savings account to hold surplus funds, more than nine out of every ten businesses that do have a savings account, choose to hold their savings with the same bank as their business current account.
Commenting on the findings, Simon Healy, managing director of savings at Aldermore said: “It is concerning that only a minority of small and medium-sized businesses have a savings account, as surplus funds provide protection against unforeseen cash flow issues which can create real problems.
“This, coupled with the fact that nine out of ten SMEs hold their savings with the same bank as their business current account, shows that businesses are simply not looking around. This is concerning and underlines the issues raised by the Competition and Markets Authority ongoing consultation on competition in the SME finance sector.”
The research conducted with polling company YouGov on behalf of Aldermore, canvassed the views from over 1,000 small and medium-sized businesses across Britain, focusing on their savings habits and their views on the economy.
The main findings include:
– Less than a third (31%) of SMEs surveyed have a business savings account;
– 40% of small businesses with a savings account say they have it for unforeseen circumstances, more than a third (35%) use it for business taxes while 34% said it is to help with cash flow fluctuations;
– More than one in ten (14%) SMEs with a deposit account never review their business savings, while 25% of businesses review their savings account more than once every six months (the level of surplus funds they hold, the interest rate they are receiving etc); and
– More than a quarter (28%) of businesses surveyed say they’d be more inclined to save into a business savings account if interest rates increased over the next 12 months.
Additionally, the report also found regional trends as well as the differences between micro, small and medium-sized businesses.
Only 16% of sole-traders have a business savings account, while SMEs in London (38%) are most likely to have a savings account, compared to the East Midlands and North East, where only 21% of SMEs have one.
Businesses in the East of England (41%) and Scotland (40%) think an interest rate increase would be negative for their business, compared to the 37% of businesses in the South East that think an increase would be a positive step.
Aldermore’s Simon said: “While rates remain relatively low, it is easy to understand why many businesses are attracted to the convenience of keeping their savings with their current account provider. However, it is important to ensure that any surplus funds are working as hard as business owners do. There are significant differences in the interest rates available on deposit accounts and it is important that businesses do not lose out on maximising the return they get on their hard-earned surplus funds.”
Lee Tillcock, Editor of leading comparison publication Business Moneyfacts said: “Even in the current low interest rate environment, the interest rates available to SMEs differ considerably by provider, from 0% to 3.5% depending on the level of savings and whether the business is willing to tie up their funds for a set term.
“While this research shows many businesses are choosing not to hold a deposit account, a growing number of brokers and business owners are using our magazine and visiting our website in order to review available options and ensure that surplus funds are generating a return for businesses.”
