Over three million SMEs get no interest from their business savings

New research shows that 62 per cent of SMEs are getting absolutely no interest on their business savings, but their money could be working a lot harder.

Over three fifths (62 per cent) of SMEs in Britain – that’s three million businesses – are not earning any interest on their business savings.

According to the latest research from specialist bank Aldermore, financial pressures are the main reason for this; two fifths (40 per cent) of those not earning interest do not save a sufficient amount on a monthly basis, whilst a third (33 per cent) of SMEs are exhausting their savings before they can gain any interest.

The current low interest rate environment is an additional concern as almost two in ten (19 per cent) believe their bank does not offer high enough rates for noticeable interest to be earned.

For those businesses who are earning interest on savings, the majority (53 per cent) are earning less than £300 annually, with the highest proportion (26 per cent) earning less than £100.

When exploring habits among the self-employed and SMEs, almost two thirds (65 per cent) hold a business account with the same provider as their private savings, regardless of the rate offered.

This mindset is more acute among firms with more employees (50+), those with higher levels of cash holdings (£100,000+) and being a limited company.

Don’t keep them together

Ewan Edwards, head of savings at Aldermore, says that being a business owner comes with a whole host of challenges. So, it is vital that business owners make their surplus cash work harder to provide additional financial support and to strengthen financial resilience.

In addition, Edwards advises against having a business and a personal savings account with the same provider,

‘While this may appear to be the ‘easiest’ option, taking this approach means businesses are missing out on a number of good products on the market. We encourage all business owners to shop around to find the best account on offer, as this can make a positive difference in the long term.’

Further reading on business savings

Lack of business savings placing strains on UK self-employed

Related Topics

Business Bank Accounts

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