London businesses holding the most cash in savings accounts

Small companies in the capital are soaring ahead of their regional counterparts by holding more than half a million pounds in business savings accounts, research finds.

However, while London-based small and medium-sized enterprises (SMEs) have the largest business savings pots, SMEs in the West Midlands are the UK’s top business savers, holding 73 per cent of firm funds in business savings accounts, ahead of London-based businesses (59 per cent).

The study of 500 SMEs, commissioned by Hampshire Trust Bank, discovered a vast regional difference in the amount of money small business hold in current and savings accounts.

According to the research, London and West Midlands-based SMEs have significantly higher savings than businesses in other regions. Smaller businesses in the capital have on average £539,510 in their business savings accounts and West Midlands companies have £394,405, compared to a national average of £273,305.

This aptitude for saving is echoed in the fact 39 per cent of London companies feel confident in putting cash away for more than a year – higher than the national average of 25 per cent.

West Midlands SMEs also follow this trend as more than a quarter (28 per cent) feel confident about putting cash away for more than a year in accounts that typically have better rates of savings.

While smaller businesses in the North East, East and Yorkshire & Humberside have the lowest amount in business savings, they are actually placing about half of their total funds in business savings (47 per cent in both the North East and Yorkshire & Humberside and 52 per cent in the East), which is in line with the national average (52 per cent).

Northern Ireland-based SMEs hold the lowest percentage of funds in business savings (39 per cent), potentially missing out on the means to improve day-to-day cash flow, or fund growth.

When considering why Northern Irish SMEs are keeping more cash, Hampshire Trust Bank finds that there is a wide range of reasons with the majority (55 per cent) wanting to build a cash buffer and 40 per cent saving for a major purchase.

These firms may want to consider the benefits of business savings accounts for a proportion of their money, which typically have a better rate of interest, in order to reach their purchasing targets sooner.

Stuart Hulme, head of savings at Hampshire Trust Bank says, ‘There is huge regional variation in the amounts businesses are holding in their current and savings accounts. What’s revealing is that the businesses which have lower overall amounts of money in the North East, East and Yorkshire & Humberside, are putting a significant percentage of the cash they have available into savings accounts, indicating these businesses are confidently planning for the future.

‘That is why we recently launched our new suite of business savings products. The benefit of making use of these savings accounts is not only the interest rate return you get as a business, but also the knowledge that the money is being lent on to businesses looking to grow, delivering double value and supporting the growth of the UK economy.’

Further reading on business banking

Ben Lobel

Delphine Hintz

Ben Lobel was the editor of SmallBusiness.co.uk from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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