This article draws on research by the Centre for Economics and Business Research (Cebr) to examine the post-pandemic landscape for SMEs, including:
- The impact of COVID-19 on their cash reserves
- Factors that influence how SMEs manage their cash
- SMEs attitudes towards technology
To find out more about the savings landscape for SMEs, download the State of the Deposit Market for UK SMEs Report.
Despite government attempts to mitigate the pandemic’s impact with initiatives including the Coronavirus Job Retention scheme, a business rates holiday and grants for small businesses, the fall in turnover undoubtedly put a strain on many businesses.
However, according to Cebr’s ‘The State of the Deposit Market for UK SMEs’, a third (31%) of surveyed SMEs stated the value of their savings stayed the same, and 26% reported a rise in their cash deposits in the same period. Almost one-in-10 saw their cash deposits increase by more than 50%. Here are the reasons why:
- Nearly half (49%) cited an increase in revenue.
- 35% said their savings were buoyed by government-backed schemes, such as The Bounce Back Loan Scheme.
- Almost a third (28%) attributed savings growth to a reduction in workforce costs.
- 24% said their cash increased following government grants or tax relief.
So how has the pandemic influenced SMEs’ future behaviour?
Understandably, Cebr’s report found many SMEs had become more risk-averse, with 21% of businesses saying they intended to save more of their profits. However, the need to adapt quickly to the pandemic’s myriad and rapidly changing restrictions have also made SMEs think more about how they manage their cash deposits:
- A third (33%) of SMEs plan to expand their use of financial technology, such as mobile apps and digital platforms.
- 24% said the digital banking applications and features offered will have more influence on where they place their cash.
- For just under a third (29%), quick and easy access to their funds has become more important.
- 15% said security and protection provided under the Financial Services Compensation Scheme has gained importance.
Despite their best intentions to save, SMEs are potentially missing out on a collective £3.2bn in interest by leaving their cash deposits in accounts paying less than the market-leading interest rates. With many looking at the prospect of repaying outstanding loans for years to come, this is money they can ill-afford to lose.
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