Small and medium sized businesses across Portsmouth are losing out on an average of £2,256 per year in ‘lost’ interest payments, according to new research from Allica Bank.
The ‘big six’ high street banks are ripping off their small and medium sized business customers by offering them excessively low rates of interest on their savings. Allica Bank’s latest independent tracker, which monitors interest rates offered to SMEs, has shown that big British banks are offering an average rate of just 1.39% to small businesses on their savings.
In comparison, challenger banks are offering rates of up to 4.40% on the same cash.
This means that the average SME with £75,000 of savings who is banking with one of the big banks is missing out on £2,256 a year in extra interest.
For those more established businesses with £1 million in the bank, this missing interest adds up to more than £30,080 annually.
With 5,980 small and medium sized businesses across Portsmouth, this means a total of more than £13.4 million is being lost to the local economy every year, while Allica research calculates the value of lost interest to the UK as a whole to be £8.6 billion a year. This has risen 15% from £7.5 billion in September 2023 (this is a result of the volume of savings growing, and rising interest rates).
In response Allica Bank is calling for a shake-up of the business savings market, and for government and regulators to force big banks to notify their SME customers of the top rates in the market and where they can be found. This would increase transparency in the market, encourage competition, and help small businesses to make the most out of their hard-earned savings.
Vicki Penfold, Relationship Manager for Portsmouth at Allica Bank said:
“Portsmouth’s SME economy is Portsmouth’s real economy, accounting for nearly 6,000 businesses. These businesses are the life and soul of communities across the city and the difference between boarded up shops and vibrant high-streets.
“Despite this, SMEs aren’t getting the returns they deserve from high-street banks with interest rates that are consistently lower than are offered to bigger businesses. This lost income could represent a significant boost to Portsmouth’s economy and be put toward investment in the business and support for growth plans.
“The high-street banks are taking SME customers for granted, and those customers should shop around and get the return on their savings that they deserve.”
Allica’s research tracks the top rates offered every month by the challenger banks and contrasts it against those rates offered by the six largest incumbent providers in the UK – Barclays, HSBC, Lloyds, Nationwide, NatWest and Santander.
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. The firm recently wrote to the Treasury Select Committee (TSC) asking MPs to investigate the lack of transparency in the business savings market and has since launched a campaign – The Great British Savings Squeeze – to tackle the issue, which has seen support from the FSB, IoD and other leading industry bodies. It is calling for people to sign its petition.
Allica is the UK’s only full-service bank solely focussed on established SMEs. It is the UK’s fastest-growing company over the past three years and is the UK’s fastest growing fintech ever.
