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More than half of South West SMEs earning less than 0.10 per cent on their cash

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Written by: Hannah Baker | Posted 01 November 2017 10:20

More than half of South West SMEs earning less than 0.10 per cent on their cash

More than half (57 per cent) of SMEs in the South West are earning less than 0.10 per cent on their cash and 82 per cent are dissatisfied with the interest rate they’re getting from their bank, according to research from YouGov.

The research found that more than one in three SMEs hold all of their cash in their current account.

There are 5.5 million business current accounts held by SMEs, containing £104bn, but more than 80 per cent of these accounts pay zero per cent interest

Concentration of a company's cash in a single account also represents a potential risk to the business if the value exceeds the FSCS deposit protection limit (of £85,000 per qualifying depositor per authorised bank), according to the research.

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This is not just an issue for small companies; 25 per cent of those with a turnover of £10m or more still hold all their cash in their current account and have no separate deposit account for surplus cash, which is not required for the day-to-day running of the company.

Only 14 per cent of SMEs said that they don’t care about earning more interest and just a third said that they would be worried about the risks of placing deposits with a non-high street bank but, despite this, just 10 per cent of SMEs hold such accounts.

Simon Merchant, co-managing partner at fintech Flagstone, said, "We commissioned this research from YouGov because we knew that a persistent low interest rate environment combined with the onerous and time consuming nature of deposit account opening processes had created client inertia, resulting in sub-optimal returns for SMEs and increased risk exposure through a lack of diversification.”

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