THE MAJORITY of UK small- and medium-sized enterprises (SMEs) are failing to generate any return on their business savings, according to new research.
A survey conducted for challenger bank Aldermore found that 62 per cent of SMEs, equivalent to three million businesses, are not earning any interest on their savings.
Of those SME businesses earning interest, over half are earning less than £300 in interest annually and over a quarter are earning under £100 per year.
“Being a business owner comes with a whole host of challenges, so it is vital that business owners make their surplus cash work harder to provide additional financial support and to strengthen financial resilience,” said Ewan Edwards, head of savings at Aldermore.
“Our research shows over three fifths of SMEs are not earning any interest, meaning over three million businesses could be missing out on additional income that would be an added boost when dealing with the multiple financial pressures of running a business; such as cash flow.”
According to Aldermore’s research financial pressures were the main reason that businesses are failing to earn interest on savings.
Two fifths of SMEs do not save a sufficient amount on a monthly basis, whilst a third of are exhausting their savings before they can gain any interest.
The current low interest rate environment is an additional concern as 19 per cent believe their bank does not offer high enough rates for noticeable interest to be earned.
“In addition, the research reveals that almost two thirds of business owners adopt the habit of having a business and personal savings account with the same provider,” said Edwards.
“While this may appear to be the ‘easiest’ option, taking this approach means businesses are missing out on a number of good products on the market.
“We encourage all business owners to shop around to find the best account on offer, as this can make a positive difference in the long term.”
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