Allica Bank, which offers full-service banking for SMEs with between five and 250 employees, is backing a new campaign looking to shake up the SME business savings market, which is leaving small businesses shortchanged.
SMEs across the country are losing out on more than £7.5billion of interest each year due to big banks shortchanging them on their savings. To combat this, the new Great British Savings Squeeze campaign is hoping to draw attention to banking inequalities faced by small businesses.
The campaign, backed by the likes of the Institute of Directors, Federation of Small Businesses and the British Independent Retailers Association, calls for banks to offer small businesses the same savings rates as big firms.
It also urges banks to actively notify their SME customers of the top three rates in the market; while increasing the protections for SME deposits to give small firms confidence to save large amounts with all banks, by raising limits for the small business Financial Services Compensation Scheme.
Richard Davies, CEO of Allica Bank, said: “It is a scandal that SMEs are missing out on more than £7.5billion of interest on their hard-earned cash every year, leaving small firms short-changed and holding back vital funding from local economies.
“The variation in interest rates offered to companies of different sizes exploits both the lack of transparency in the market and the limited time many small business owners have available to optimise their finances.
“This campaign will bring attention to that fact, and our goal is for there to be a much greater focus on savings rates for small businesses, in the same way there has been from politicians and regulators on savings rates for consumers.
“We are determined to drive change in the business savings market – Britain’s established businesses deserve better.”
The £150billion problem
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. In October, the firm wrote to the Treasury Select Committee (TSC) asking MPs to investigate the lack of transparency in the business savings market.
It has now reiterated this call with a second letter to the committee, requesting that the TSC ensure it covers the investigation of the business savings market in the SME Finance Inquiry it is shortly due to conclude.
Craig Beaumont, chief of external affairs at the Federation of Small Businesses, said: “It’s time SMEs got a fair deal on their savings, after all the least any bank should be doing is offering a decent savings rate to SMEs.
“Britain’s army of small firms have enough on their plates without having to worry about the rates they’re getting on their hard-earned savings.”
Dr Roger Barker, director of policy at the Institute of Directors, said: “Britian’s hard-working SMEs deserve to be supported – including by their bank. It’s a tough economy out there to survive as a small business, so it’s vital SMEs are getting decent interest rates on their savings.”
Research conducted by Allica Bank shows that SMEs are typically offered savings interest rates which are two per cent lower than rates offered to bigger companies – simply because they are small businesses.
Meanwhile, around £150billion of SME deposits are sitting in current accounts which offer no interest at all.
The Great British Savings Squeeze campaign is aiming not just to raise awareness of this hidden savings penalty but also to gather high-profile support and drive real industry-wide change in the sector.
