Updated research into the business savings market by Allica Bank has revealed that the UK’s small firms are now being short-changed by up to £9 billion a year by the UK’s broken business savings market – a massive 20% increase in the past year since Allica’s first research into the market.

The significant increase in lost savings interest has happened despite overall SME deposits declining 10% to £248 billion over the past year (from £275 billion) and Bank of England interest rates remaining flat or falling in the same period.

The new research reveals the truly broken nature of the SME savings market.

The rise in lost savings interest has been driven in particular by a 40% increase in the hidden SME savings penalty, where SMEs are offered far lower savings rates than the rates banks offer large companies.

Large firms are now being offered a ‘premium’ of 2.9% better interest rates for their savings than SMEs; a 40% increase compared to the 2.1% ‘premium’ offered to large companies in September 2023.

Allica’s original research found that SMEs were losing out on up to £7.5 billion in lost savings interest, either from accounts not paying any interest or in accounts that paid less to SMEs than was available for large firms.

Those figures have now been updated to reveal the amount of lost SME savings interest now stands at a staggering £9 billion, made up of:

• £5.45 billion resulting from £126 billion in SME deposits being left in zero interest accounts, compared to savings interest rates of more than 4% offered by multiple challenger banks
• £3.58 billion resulting from the hidden SME savings penalty, with £122 billion in SME deposits receiving lower savings interest than is offered to large companies for their deposits

Richard Davies, CEO of Allica Bank, said: 

“There’s no question the SME savings market is broken.

“The fact the SME savings penalty has got larger since we first did our research last year – while the Bank rate has reduced slightly – is a travesty many SMEs will find hard to understand.

“It’s very unfair SMEs don’t get similar rates to large companies, and our research suggests big banks won’t be improving their rates for SMEs any time soon.

“It’s time for something to be done to make that change, get SMEs a better deal and release billions of pounds into the real economy.”

Calls for action 

Allica Bank has previously called for an investigation into the business savings market by government and regulators.

Together with the Federation of Small Businesses (FSB), Institute of Directors and (IoD) and British Independent Retailers Association (BIRA), the Great British Savings Squeeze campaign was formed.

The campaign asks for an immediate investigation into the business savings market, with a focus on asking government and regulators to repair the broken elements and get small businesses they money they deserve.

Specifically, the campaign is calling for the following:

• End the SME savings penalty – get banks to start offering small businesses the same savings rates as big firms
• Notify SMEs of better rates – banks should actively notify their SME customers of what the top 3 rates in the market are
• Increase protections for SME deposits – give small firms confidence to save large amounts with all banks, by raising limits for the small business Financial Services Compensation Scheme