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UK SMEs have an average savings balance of £556,000

Smaller British businesses build cash reserves to act as a buffer

For every £1 held in a business current account there is £1.31 in a business savings account

Small and medium sized enterprises (SMEs) built up cash reserves on the lead up to the Brexit vote, with the average business savings account balance now standing at £556,000 – a 104% increase on 2015*, according to new research from specialist challenger bank Hampshire Trust Bank.

In the annual survey, first conducted in 2015, nearly a third (30%) of SMEs said they intended to increase the amount of cash held in business savings following the outcome of the EU Referendum with a further 54% saying they would keep business savings at the same level. More than a third (38%) said they were increasing cash reserves to build a bigger cash buffer for their business.

At the same time, SMEs are also increasing cash in their current accounts, with the average balance now standing at £423,000, an 81% increase from last year**. According to the research, on average, for every £1 in a current account that a UK business holds there is another £1.31 in a savings account.

However, while navigating an uncertain political and economic landscape, firms are identifying opportunities for growth, with almost 17% saying they were accruing cash in order to fund a major purchase.

When asked what they would use the return from their savings to invest in, the majority, one in five (21%), said they would use the money to invest in the infrastructure of their business.

Stuart Hulme, Director of Savings at Hampshire Trust Bank, said: “In an uncertain political and economic environment, this snapshot of SME savings suggests businesses are remaining cautious and this is causing them to boost their cash reserves. Therefore, the opportunities to make more out of every £1 earned should remain a key priority. It is encouraging to see that SMEs are looking to the future and plan to use the return from their savings to help fund investment into the infrastructure of their businesses, which seems to suggest increased confidence in the longer term.

“We offer a range of savings accounts for businesses that want to put away money for the short and long term. The benefit of making use of our savings accounts is not only the interest rate return you earn, but also the knowledge that the deposited money is being lent on to SMEs looking to invest in their futures, supporting the growth of the UK economy.

“With a third (31%) of the smaller businesses we surveyed citing a desire to have a ready source of cash available for regular payments, they should feel reassured that by shopping around they can identify accounts which provide them with a wide range of terms as well as competitive rates of interest.”

The study revealed that SMEs are willing to tie up their savings for an average of nine months, consistent with 2015. Hampshire Trust Bank offers a range of savings products ranging from a 120 Day Business Notice Account to a 5 Year Fixed Rate Bond, allowing businesses to tailor their savings to their cash flow.

For more on Hampshire Trust Bank’s business savings accounts

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