Small Talk: Firms that have cash are finding it tough as well

In a nation obsessed with home ownership, savers have long been let down by policymakers' one-eyed focus on mortgage interest rates – never more so than today in this era of unprecedented monetary stimulus when millions of savers are earning negative real rates of return on their money. But while personal savers are beginning to build up a head of steam as they protest at the raw deal they're getting, who is looking out for the interests of small businesses who hold money on deposit?

The predicament of businesses with savings mirrors the situation in the personal banking sector. The debate about banking services is almost entirely concentrated on whether or not small businesses are being denied access to credit. The plight of the very substantial numbers of businesses with sums on deposit, meanwhile, has been completely ignored.

More small businesses than you might imagine are affected. Like their larger counterparts, smaller companies have been reluctant to invest during this ongoing period of economic volatility, preferring instead to hold on to spare cash in case of emergency.

Unfortunately, this cash is suffering an emergency of its own. Thanks to the pathetic rates of interest paid to business savers – far worse than in the individual savings market – their money is losing value every single day. At 2.8 per cent, inflation is running at more than four times the average rate paid on a business savings account – and costs for many small businesses are rising even faster than this headline rate suggests.

Cambridge & Counties Bank, one of several new "challenger" banks launched over the past couple of years targeting business customers, says businesses will collectively earn £1.4bn less interest on deposit accounts in 2013 than in 2008. Five years ago, business customers earned 2.93 per cent on a £10,000 balance in the average deposit account – today they're getting an average of just 0.69 per cent. In part, that reflects the fall in the Bank of England base rate, which averaged 5.5 per cent in 2008, but has been stuck at 0.5 per cent since March 2010. But the average figure also over-estimates the amount of interest that small businesses are really earning on their savings, for the biggest banks pay much less.

Indeed, at Barclays, Lloyds, HSBC and Royal Bank of Scotland, which together account for almost all the business banking services to UK small businesses, savings products – and each institution offers a confusing array of them – routinely pay as little as 0.05 per cent a year. And that's before tax.

Not one of these large banks makes it into the top 10 ranking of savings products for businesses compiled by Moneyfacts, the personal finance data analyst. And while each of them offers fixed-term savings products that do pay higher interest rates to small businesses prepared to lock up their money for a set term, these are almost all uncompetitive too.

There are alternatives, but small businesses need to seek them out. That doesn't always happen; many firms fear they'll jeopardise already precarious relationships with their banks by moving savings elsewhere, though there's no evidence that this is the case.

Santander, for example, offers 1.5 per cent interest on its online instant access savings accounts for business – 15 times more than what's available from the four banks whose stranglehold of the UK market it is beginning to break.

The challenger banks are having an impact too – Shawbrook Bank, another new venture aimed only at business customers, pays 2 per cent on balances of £5,000 or more, though it requires 100 days' notice of withdrawals. Cambridge & Counties pays 1.95 per cent on its new 95-day notice account (the launch of which was the cue for its research into the business savings market).

However, these products are the exception rather than the norm. Far more small businesses are being fleeced by their banks on savings interest than are missing out on access to credit. Moreover, in a lending-obsessed environment, the banks are getting away with it.

ABD bucks the trend with IPO

New listings on the Alternative Investment Market (Aim) continue to be in short supply and IPOs from UK companies are even rarer.

One business set to buck the trend, however, is Anthony Best Dynamics (ABD), which will announce today it has appointed advisers to help make its Aim debut. ABD produces kit for car manufacturers to check vehicle suspension, brakes and steering. It made a profit before tax of £1.8m last year, on sales of £8.9m. An IPO would enable ABD to build new facilities to triple its production capacity, as well as establish new offices in Asia.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Life and Style
A monstrous idea? Body transplants might no longer be science fiction
Science An Italian neurosurgeon believes so - and it's not quite as implausible as it sounds, says Steve Connor
Sport
Demba Ba (right) celebrates after Besiktas win on penalties
footballThere was no happy return to the Ataturk Stadium, where the Reds famously won Champions League
Arts and Entertainment
Natural beauty: Aidan Turner stars in the new series of Poldark
arts + ents
News
Mia Freedman, editorial director of the Mamamia website, reads out a tweet she was sent.
arts + ents
News
people
Arts and Entertainment
The write stuff: masters of story-telling James Joyce, left, and Thomas Hardy
arts + ents...begging to differ, John Walsh can't even begin to number the ways
News
Image from a flyer at the CPAC event where Nigel Farage will be speaking
news
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Telesales / Marketing Executive - B2B - OTE £25,000

£17000 - £25000 per annum: Recruitment Genius: An opportunity to join this new...

SThree: Trainee Recruitment Consultant

£18000 - £21000 per annum + OTE £45,000: SThree: SThree Group have been well e...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Recruitment Genius: Business Control Manager

£36000 - £44000 per annum: Recruitment Genius: Encouraging more businesses to ...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower