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Monthly Savings Tracker (May 2024) - the Great British Savings Squeeze

13th May 2024
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Monthly Savings Tracker May
Allica Bank

Britain’s SMEs lost out on more than £200m in savings interest last month, due to the continued low rates offered by big banks.

Allica Bank’s latest Monthly Savings Tracker report reveals that the gap between rates offered by challenger banks and the big six remains at just under 3%.

The campaign and connected petition, calling for the government and regulators to help businesses get the interest rates their hard work deserves, are being led by a coalition of organisations: Allica Bank, the Federation of Small Businesses, the Institute of Directors, the Independent Retailers Confederation and the British Independent Retailers Association.

Another month without progress

The Bank of England’s Base Rate has been held at 5.25% for 10 months, giving banks plenty of opportunity to bring their savings rates in line. Unfortunately, May marks nine months since any of the UK’s leading six banks have changed their business savings rates.

The average interest rate attached to savings products from the big six is just 1.6%. On the other hand, challenger banks remain agile and are providing competitive rates – the highest being 4.33% AER.

The overall picture is unchanged from April, but that only means that the gap has persisted. There’s been no sign that rates offered by the incumbents will change.

Large, enterprise customers continue to have access to accounts offering higher rates - one of many benefits of their corporate banking products. For SMEs, though, the red carpet remains unrolled.

While SMEs are having to service their debts at rates that many will have seen quickly rise in line with the Base Rate, their savings are returning a comparable pittance. Costs rise, returns don’t. It’s a story we’re hearing often and you likely can say the same for many of your SME clients.

A big difference for the average SME

The report bases its figures and calculations on the average savings balance for UK SMEs, which is currently around £75,000.

In this case, for the average SME, saving with one of the incumbents means missing out on a potential £172 per month in interest. Over a year, that totals a touch over £2,000 in lost interest. Whereas for those clients with more cash on the balance sheet it can really start to add up. An established business with £1 million on the balance sheet, for example, will be missing out on over £27,000 in interest. That could be a whole extra member of staff!

Challengers have proven that it’s more than possible to give businesses a stronger savings rate. The incumbents appear to be dragging their heels in doing the same.

When considering the entire SME market, we can estimate that, in a single month, Britain’s SMEs have lost out on a potential £208 million in returns on their savings – money that could have been invested back into their business. This is a frankly staggering figure and brings into focus the wider impact on the UK’s economic performance.

CEO of Allica Bank says there is “no excuse”

On publication of the report, Richard Davies (CEO of Allica Bank) shared his thoughts on the ongoing short-changing of Britain’s SMEs by big banks.

“SMEs across the country are getting ripped off when it comes to their business savings and nothing is changing.

“The Bank of England Base Rate has consistently sat at around 5% for almost a year now, which means there is no excuse for big banks not passing on better savings rates to their SME customers.

“Seeing the continued stagnation of the rates these big banks offer SMEs just confirms to me that they don’t value their small business customers. It’s an incredibly tricky time to be a small business owner in the UK and every penny counts, which makes it even more galling to see the amount of money the incumbents are withholding from SME customers.”

The push for better savings

The Great British Savings Squeeze campaign continues apace, with the coalition of partners behind it encouraging business leaders and SME owners to sign the petition calling for change.

From an Allica Bank perspective, we’re dismayed that so many businesses aren’t being given the rates they rightly deserve. It’s another chapter in the story of established SMEs falling between the cracks with big banks. It’s also motivation for us to continue to serve this often-overlooked market, knowing what a difference we could make.

If you’d like to talk to one of our dedicated accountancy partnerships team about how your clients can get more from their savings, reach out to our team at allica.bank/accountants.