The UK economy is missing out on a vital boost as small-and-medium sized businesses sit on £86 billion of dormant cash in accounts that pay little or no interest, reveals Shawbrook Bank’s inaugural SME Savings Monitor.
Its research shows that SMEs hold an average of 57% of their total capital in current or instant-access accounts, rather than fixed-term deals that typically pay higher rates of interest, potentially missing out on £4.2 billion of extra interest every year.
Figures from UK Finance show that in the last five years SMEs have increased their cash reserves by £66 billion to £329 billion, with £186.1 billion held in current accounts and £140.9 billion held in deposit accounts.
Julian Hynd, Chief Operating Officer at Shawbrook Bank, said: “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. While 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.”