Unlocking Savings Opportunities: SMEs Advised to ‘Shop Around’

Nov 7th 2023

Small and medium-sized businesses (SMEs) are the lifeblood of any thriving economy – and yet they often find themselves at a disadvantage when it comes to obtaining fair savings rates. A recent article by James Hurley, enterprise editor at The Times, highlights the Financial Conduct Authority’s (FCA) efforts to rectify this issue. The FCA is now urging banks to extend the same level of fairness and transparency to SMEs as to individual customers.

Banks have faced criticism for maintaining low savings rates for individuals, despite higher rates set by the Bank of England. In response, the FCA introduced an action plan for cash savings in July 2023. This plan encourages banks to pass on interest rate increases to savers, enhance customer communication and offer more competitive savings rate deals. Some banks have since responded by raising their rates. The focus is now on ensuring fair treatment for SMEs that seek to grow their savings.

“With calls for greater fairness from the FCA, and savings rates generally remaining high, it’s the right time for SMEs to consider how they might diversify their cash reserves and optimise returns. For many SMEs, a cash management platform could be the ideal solution” – Kate Eadie, Chief Commercial Officer at Insignis Cash


How a cash management platform can help SMEs to “shop around”

To optimise returns on their savings, SMEs are advised to take UK Finance’s suggestion to “shop around”. Online cash management platforms provide a simple and efficient method of doing this. They are an ideal tool for time-poor small businesses looking to identify the best savings rates.

Using a cash management platform, businesses can compare rates, terms, and features of various savings options from different banks and building societies – all in one place. This makes it far easier to find the right savings product, which in turn can lead to SMEs earning more interest on their cash reserves . Taking into consideration the FCA’s ongoing calls for fairer savings rates, a small business can easily envisage how they could secure better returns on their savings through using a cash management platform.


The broader picture for cash savings

We should also consider the FCA’s calls for fairness towards SMEs within the broader cash savings landscape. The November 2023 Monetary Policy Committee (MPC) meeting confirmed that the Bank of England (BOE) will maintain the UK base rate at 5.25%. This ensures a continuation of the current 15-year rate high, which should lead to more consistent returns on cash holdings . BOE governor Andrew Bailey also opined after the meeting that “it is much too early to be thinking about rate cuts”, in reference to current inflation being perceived as stubbornly high.

We now have a situation where the FCA is calling for fairer rates for SMEs against a backdrop of higher base rates more broadly. Therefore, it is an important time for SMES to consider how they can benefit from this situation and maximise the potential returns their cash reserves could provide. Using a cash management platform gives SMEs an instant overview of the different terms and rates available to them.

In conclusion, the call for fairer savings rates for SMEs is gaining momentum. The FCA’s efforts should be instrumental in bringing about that change. However, it’s not just about pushing banks to provide better rates; it’s also about empowering SMEs to take control of their financial well-being. Cash management platforms are emerging as valuable tools to ensure SMEs receive the best returns on their savings. They are providing SMEs with the means to secure more favourable savings rates within suitable terms. This positive development empowers small businesses and fosters a more equitable financial ecosystem for all.

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Rates are correct on the Insignis Cash Platform as of 14 May 2024. Rates are subject to a minimum and maximum deposit size. Availability of product will vary depending on the client type.

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