The UK economy is missing out on a vital boost with small- and medium-sized enterprises (SMEs) stockpiling £86bn of ‘dormant cash,’ research claims.
Analysis by the Centre for Economic and Business Research (CEBR) on behalf of Shawbrook Bank found that SMEs are holding an average of 57 per cent of their total capital in current or instant-access accounts paying low rates of interest.
The research, part of Shawbrook’s inaugural SME Savings Monitor, found firms require quick access to 31 per cent of their cash reserves to cover their day-to-day costs but warned they are missing out on £4.2bn in extra interest each year.
SMEs suggested more flexibility over deposit amounts and terms would encourage them to save more.
“The amount of money SMEs are keeping in accounts paying little or no interest is indicative of the cautious nature of many firms in the current economic and political climate,” Julian Hynd, chief operating officer at Shawbrook Bank, said:
“While, of course, it is prudent for firms to keep some cash within easy reach to cover the daily costs of running a business, having too much money that is earning next to no interest can have an adverse impact on finances.
“SMEs are the backbone of UK plc and the savings industry needs to provide greater incentives to those firms to maximise the interest they receive on their cash reserves.
“Quicker access to better paying accounts, more innovative and flexible products and improved mobile and online services are just some of the ways providers can help tackle inertia in the market and encourage greater engagement from SMEs.”