Allica Bank: UK SMEs Left ‘Ripped Off’ as High Street Banks Fail to Increase Savings Interest Rates

The UK’s biggest banks are leaving SMEs shortchanged regarding their savings interest, with businesses worse off by an average of nearly £2,160 a year according to new research by Allica Bank. 

While interest rates remain high in the UK – the Bank of England‘s base rate has sat still at 5.25 per cent for almost a year – many banks have been unwilling to up the rates offered on savings accounts for consumers and businesses alike.

Almost everyone has experienced dramatic rises in the interest rates on loans and mortgages, but the same cannot be said for their savings. In fact, high street banks in the UK are still offering average interest rates of just 1.45 per cent to small businesses on their savings.

This is the lowest average savings rate seen in this market since August 2023, when rates were sitting at 1.29 per cent.

However, challenger banks are bucking this trend, and are offering rates of up to 4.33 per cent on the same cash. This means that the average SME with £75,000 in savings which is banking with one of the big banks is missing out on £2,157 a year in extra interest.

Urges to increase transparency and competition

The findings come from an independent tracker monitoring interest rates offered to small and medium-sized businesses. Allica Bank, which carried out the research, is calling for a shake-up of the business savings market and wants to spread the word about big banks neglecting Britain’s SMEs.

It is 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. It says this would increase transparency in the market, encourage competition, and help small businesses to make the most out of their hard-earned savings.

Allica’s SME Monthly Savings Tracker monitors the average savings rates offered by big banks compared to the savings interest rates offered by challenger banks for comparable SME savings products.

“It’s a tough time to be an SME in the UK and the last thing small business owners need is to be shortchanged on their savings – many without even knowing it,” explained Richard Davies, CEO of Allica Bank. “Our Monthly Savings Tracker measures the extent to which SMEs are being ripped off on their savings. We hope that by continuing to track and spread the word we can help change things for the better and get SMEs the banking they deserve.”

The 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.

Lots on the line

The tracker has shown a continued and significant gap between the rates SMEs are offered by challenger banks and their larger, incumbent competitors.

This data underpins the bank’s previous research, which found that SMEs are due more than £7.5billion in ‘missing’ savings interest per year, with big banks offering much lower interest rates to smaller firms compared to large companies, and in many cases offering smaller firms no interest at all on their savings.

There are a number of established SMEs across the UK who have much more than £75,000 saved with their bank. For these businesses, the cost of keeping cash in a low-interest account is significant. For example, a business with £1million in surplus cash would be missing out on a staggering £28,760 annually.