SMEs across Slough, Windsor and Maidenhead are earning just a third of the interest that they could be getting on their savings.
Big banks are offering their small business customers among the very worst savings rates in the market, according to an independent tracker, produced by Allica Bank, which monitors rates.
It shows the average savings rate offered to SMEs by the big high street banks is just 1.39%.
In comparison, several challenger banks are offering rates of up to 4.45% on the same cash.
This means the average SME with £75,000 of savings would see annual interest of £1,044 if they banked with one of the big banks at the above rate. Meanwhile the same amount of money would earn £3,337.50 saving with a challenger bank at a rate of 4.45%.
That is a huge £2,293.50 extra in a year – which can quickly add up. With 18,235 SMEs across Slough, Windsor and Maidenhead, this means the local economy is missing out on more than £40 million in ‘lost interest’ every year.
Windsor is the worst affected town where SMEs are losing more than £15m annually in lost interest. For Maidenhead the figure is £13.8m, Slough SMEs meanwhile are losing out on nearly £13m.
For those more established businesses with £1 million in the bank, this missing interest totals more than £30,000 annually.
The interest rate tracker is produced monthly by Allica Bank and monitors interest rates offered to SMEs.
Over the last 18 months, the gap between the market-leading rates offered by challenger banks and the poor rates offered by the incumbent banks has widened.
However this is only one of the ways that SMEs are being ignored by the country’s largest and most well-known banking names.
High street banks are adept at exploiting the lack of transparency in the banking market and behind closed doors typically offer bigger businesses better rates than smaller ones.
This is in addition to many small 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 £8.6 billion a year in the UK – a figure which has risen 15% from £7.5 billion in September 2023 when it was first measured.
This increase is primarily the result of SMEs being offered far lower savings rates than banks offer larger companies – an issue which has gotten worse in the last year.
And it’s not an issue that is likely to change any time soon, even with the Bank of England (BoE) reducing rates earlier in the summer.
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 the 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.
Ayan Butt, Allica Bank Relationship Manager for Slough, Windsor and Maidenhead, said:
“The gap between the savings rate SMEs are offered by challenger banks compared with their larger, incumbent competitors has officially hit 3%. For some this might not seem like a big number, but for SMEs across Slough, Windsor and Maidenhead that could mean having the flexibility to invest in new equipment or even hire a new staff member.
“Our research shows that in total, SMEs across Slough, Windsor and Maidenhead are losing more than £40m because banks aren’t offering them the interest rates they deserve. That is £40m which could be in the pockets of hard working businesses helping to power high streets and the local economy.
“It’s time for this to change and for small businesses to get the money they deserve.”
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.
The data has been taken from Moneyfacts.co.uk as well as the individual banking sites.
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 focused 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.
