The average savings interest rate offered to SMEs by the big banks has finally moved after being stagnant for the last eight months. But it’s moved in the wrong direction according to an independent tracker published by Allica Bank. It reveals that UK high street banks now offer an average interest rate of 1.45% to SMEs on their savings. That is down by 14 basis points from 1.59%.
The reduction follows Nationwide withdrawing its business savings account from the market this month. Nationwide was previously offering the highest rate of the incumbent financial institutions (2.25%). It means that the average interest rate across mainstream incumbent banks has gone down compared to last month.
Challenger banks offer SMEs savings rates of up to 4.33%
This means that the average SME with £75,000 of savings that is banking with one of the big banks is missing out on nearly £2,160 a year in extra interest.
Despite this, many business owners are unaware that their banks are not offering them the best rates.
Allica Bank is calling for this inequality to be addressed. Specifically, it wants government and regulators to force big banks to notify their SME customers of what the top rates in the market are.
It says that this will increase transparency in the market and encourage competition. And it will help small businesses to make the most out of their hard-earned savings.
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By GlobalData
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 has shown a continued and significant gap between rates SMEs are offered by challengers and larger incumbent competitors.
UK SMEs continue to be ‘ripped off’: Allica Bank CEO
This rates discrepancy occurs despite the Bank of England Base Rate remaining steady at 5.25% for almost a year.
Richard Davies, CEO of Allica Bank, said: “Every month our tracker continues to show that British SMEs are being ripped off when it comes to their business savings. We hope that by bringing attention to this issue we can start to change things for the better. And help business owners across the UK to make the most of their savings.
“There are more than five million SMEs in the UK who bring huge value to the UK economy and our communities. It’s time they were given the banking they deserve.”
