When it comes to savings high street banks still take small business customers for granted
High street banks are ripping off their small and medium sized business customers by offering them excessively low rates of interest on their savings.
Allica Bank’s latest independent tracker, which monitors interest rates offered to SMEs, has shown that big British banks are still offering an average rate of just 1.39% to small business on their savings.
In comparison, challenger banks are offering rates of up to 4.40% 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 £2,256 a year in extra interest.
For those more established businesses with £1m in the bank, this missing interest adds up to more than £30,080 annually.
And in reality, SMEs are being hit with a triple whammy as high street banks exploit the lack of transparency in the market.
This is because SMEs are not only being offered poor savings rates compared to challenger bank offerings, but also worse savings rates than bigger firms who bank with the very same providers. This is in addition to many businesses simply keeping their cash in a current account earning no interest at all, likely because many business owners don’t see the poor rates on offer from the big banks as worth the hassle, or because they’re not aware of better rates that are available.
The scale of this issue, when taken across all of the SMEs in the UK, is staggering.
Updated Allica research calculates the collective value of this lost interest to be £8.6bn a year in the UK – an annual figure which has risen 15% from £7.5bn in September 2023 (this is a result of the volume of savings growing, and rising interest rates).
And it’s not an issue that is likely to change any time soon, even with the Bank of England (BoE) cutting rates yesterday.
That’s why Allica Bank is calling for a shake-up of the business savings market to spread the word about big banks not having SME interests at heart.
They are calling on 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.
Richard Davies, CEO of Allica Bank, said: “Our data has shown a significant and continued gap between the rates SMEs are offered by challenger banks and their larger, incumbent competitors. For more established SMEs especially, who will have larger amounts of cash on the balance sheet, this difference can have a massive impact. In today’s high-cost environment, this could be the difference between adding an extra member of staff, or investing in new equipment.
“As the UK economy stabilises after years of uncertainty, there’s little excuse I can see for this continued poor treatment of SMEs and their savings from our biggest high street banking names. And with the BoE lowering base rates yesterday, we’ll be keeping a close eye to see if the disparity improves.
“We want to see SMEs get the cash they are owed and for business banking to change for the better.”
Allica’s 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.
