The savings landscape hasn’t been the easiest to navigate over the years, with interest rates plummeting and retaining record lows. It may be hard to remember a blissful time when the base rate sat at an attractive 5.5%, prior to confronting a global recession in 2008 and Brexit’s financial fallout.
Paired with a global pandemic, these economic challenges have stirred up a hunger for businesses to secure their cash in keeping with a changing (and often unpredictable) environment. It’s no surprise that many small and medium-sized enterprises continue to seek a safe house for their funds, while others with the luxury of a large savings cushion look for solutions to offset supressed income.
The Bank of England base rate remains at a historic low of 0.10%, with the market average interest rate for instant-access business deposits at 0.04%[1], and fixed term business deposits at 0.17%[2]. Higher rates exist with products paying up to 20 times more interest than the average; with the current market-leading business instant access account paying 0.80%[3] and the best-in-market one-year fixed term deposit account for businesses paying 1.40%[3]. By moving cash to accounts that pay market-leading rates, SMEs could avoid missing out on substantial interest, which would contribute to their income and aid the growth of their business.
According to Bank of England data, in August 2021, the collective value of SMEs’ instant access deposits stood at £300 billion[4]. Meanwhile, the total value of their fixed term deposits was an estimated £77 billion[5]. Based on the gap in the average and market-leading interest rates for deposits, SMEs are set to miss out on £2.2 billion of interest income over the next year from their instant access deposits and £941 million from their fixed term deposits – a total of £3.2 billion.
So, what is stopping businesses from capitalising on market-leading products? A discouraging low-rate environment combined with the complexities of opening savings accounts has fostered inertia amongst businesses. But for security seekers, hoarding cash in savings accounts that pay less than the market leading rate is a wasted opportunity, costing them significant returns in forgone interest.
It wasn’t only interest rates that were impacted by last year’s turbulence. Download The State of the Deposit Market for UK SMEs report to learn more about the savings market for businesses, including the effects of COVID-19 and the rise in fintech.
To find out how you or your client can waive the admin hassle and effortlessly access top interest rates, speak to us today. Flagstone can prevent businesses from missing out on interest, helping them towards their savings goals.
[1] Bank of England data [CFMHSCT] 31 August 2021
[2] Bank of England data [CFMBJ63] 31 August 2021
[3] Available on the Flagstone cash deposit platform – Rate correct and market-leading as of 7 October 2021
[4] Bank of England data [LPMZ3TL] 31 August 2021
[5] Bank of England data [LPMZ3U5] August 2021
This article is not advice. If you would like to receive advice on your savings and investments, consider speaking to a Financial Adviser.
