The New Year resolution that can generate £8bn for UK businesses

Giles Hutson, CEO of Insignis Cash Solutions, explains how active cash management can create a much needed boost for UK SMEs and the economy.

UK businesses currently hold over £800 billion of cash that isn’t being put to use – languishing in low interest accounts with non competitive rates. An improvement of even just 1% on these returns would release £8 billion back to these companies and result in a significant boost to the UK economy.

Recent research shows UK SMEs have an average savings balance of £556,000. Additional annual revenue of £5,560, based on an improvement of 1% in interest rates, could provide a vital buffer for SMEs in an extremely uncertain economic and political environment.

The traditional, convoluted process of pursuing competitive returns on cash makes it extremely tedious and time consuming. It requires constant monitoring, with products being launched and withdrawn every day, and as a result, SMEs simply don’t have the motivation to seek out higher returns on their deposits.

As a result the market share for the top five UK banks is a staggering 83%, yet there are over 150 banks taking deposits in the UK. We need to rethink how cash is viewed; the current inertia means SMEs and the UK at large is missing out on free money.

It’s not just rates that SMEs need to consider, but also liquidity. Does all your cash need to be held in easy access accounts? Holding funds across accounts with varying notice periods can make a meaningful difference to the total level of interest received.

Progress is being made across the UK banking industry. New players are driving more competitive rates and Open Banking will be a catalyst for greater transparency, encouraging a stronger culture of shopping around among SMEs. Insignis provides a platform which means this no longer needs to be a headache – SMEs can work with one company to access multiple banks.

UK businesses can gain greater autonomy over their financial future in 2018, maintaining ready access to the right levels of cash while at the same time ensuring optimum returns.  Through a more active approach to cash management, SMEs can start to fight back – improving cash deposit interest rates and increasing their financial firepower.