SMEs losing out on nearly £870 million a year in ‘missing interest’

The analysis reveals that the ‘big six’ high street banks offer an average interest rate of 1.45% on small business savings, down from 1.59% earlier in the year. Beyond the big six however, rates of up to 4.33% available from challenger banks, a figure nearly three times higher than the big six.

For SMEs with an average £75,000 in savings, the discrepancy between big six interest rates and what’s available elsewhere is equivalent to £2,157 per year. With 403,225 SMEs across the South East, this equates to a whopping loss of £869,756,325 for the regional economy. For established SMEs with larger deposits of savings, the annual figure lost could be much higher.

The big banks are under-serving SME customers despite SMEs being the back-bone of the economy and supporting high-streets, job creation, investment and livelihoods across the South East. Nationally, SMEs account for around 61% of all UK employment, and around a quarter of GDP.

The latest figures come off the back of research produced last year by Allica which revealed that SMEs are losing more than £7.5 billion per annum in ‘missing’ savings interest per year.

Commenting, Sylvia Obadaki, South East Relationship Manager at Allica Bank said: “The South East’s SME economy is the South East’s real economy, accounting for more than 400,000 businesses. These businesses are the life and soul of communities across the region and the difference between boarded up shops and vibrant high-streets.

“Despite this, SMEs aren’t getting the returns they deserve from high-street banks with interest rates that are consistently lower than are offered to bigger businesses. This lost income could represent a significant boost to the South East’s economy and be put toward investment, employment and a better deal for employees.

“The high-street banks are taking SME customers for granted, and those customers should shop around and get the return on their savings that they deserve.”

Which region is losing most in lost interest?

Region

No of SMEs

Lost interest (based on average SME savings of £75,000)

North East

72,235

£155,810,895

North West

265,840

£573,416,880

Yorkshire & The Humber

191,520

£413,108,640

East Mids

182,760

£394,213,320

West Mids

216,940

£467,939,580

East of England

268,605

£579,380,985

London

523,555

£1,129,308,135

South East

403,225

£869,756,325

South West

235,820

£508,663,740

Scotland

170,650

£368,092,050

Northern Ireland

77,930

£168,095,010

Wales

106,840

£230,453,880

About Allica Bank:

Allica is a new kind of no-nonsense business bank, built especially for established businesses with between 5 and 250 employees.

These businesses make up a third of UK employment and turnover, yet the service they get from the big banks is increasingly impersonal, inconvenient, and poor value. Allica Bank is on a mission to give established businesses the no-nonsense banking they deserve. That means a current account with no monthly fees, a relationship manager whose name and number they actually know, and technology that makes life easier, not harder.

It’s how business banking used to be, just better.

Allica was recently named the UK’s fastest-growing company in Deloitte’s 2023 UK Technology Fast 50 – with annual revenue growth that makes it the fastest-growing fintech company ever. It also revealed in 2023 that it achieved its first full year of profitability and had lent over £2 billion to established UK businesses.

Allica’s ambition is to gain 10% market share in the next five years in order to help change the SME market for the better.