According to new reseach: SME savings suffer following Brexit vote

Here’s what you need to know…

Small and medium sized enterprises (SMEs) are saving 20 per cent less than in the run up to the EU Referendum in 2016, with the average balance now standing at £446,000, according to new research from specialist challenger bank Hampshire Trust Bank.

• UK SMEs have an average savings balance of £446,000
• 20 per cent drop in savings compared to levels on run up to EU Referendum in 2016*
• For every £1 held in a business current account there is £1.09 in a savings account

The annual study shows that current accounts are also impacted with the average balance standing at £409,000, a 3 per cent drop compared to levels in 2016. This means that on average for every £1 in a current account that an SME holds there is another £1.09 in a savings account, a decrease on the £1.31 held in savings in 2016.

In the next 12 months, 56 per cent said they intended to leave the amount of money in business savings as the same, 30 per cent said they intended to increase the amount, while 14 per cent said they intended to decrease their savings pot.

Of those that said they intend to increase the amount in their business savings, 27 per cent said they wanted to do so because they were concerned about the impact of Brexit while a quarter (25 per cent) were concerned about the long-term economic outlook. This compares to the 8 per cent and 4 per cent that had concerns about the short-term and long-term economic outlook respectively in 2016.

Concern about the long-term economic outlook was cited as the main reason, by 35 per cent of SMEs, as to why they intend to decrease the amount in savings accounts in the next year.

However, despite the uncertain economic and political environment, firms are still identifying opportunities for growth. According to the research, a third (34 per cent) of those increasing the amount in savings accounts said they were accruing cash to save for a major purchase, compared to 17 per cent last year.

When asked what they would use the return from their savings for, the majority (28 per cent) said they would invest in business infrastructure, while a quarter (25 per cent) said they would use the money for research and development.

Stuart Hulme, director of savings at Hampshire Trust Bank, said: “While we are continuing to see growth across our business savings portfolio, the outcome of the EU Referendum and the current uncertain economic and political environment is clearly having an impact on SME savings balances and habits.

“We believe that at times like this it is important for businesses to remain focused on making more of their hard-earned cash and it is positive to see that UK SMEs are continuing to plan for the future.

“Savings can provide a cushion in times of potential financial bumps in the road, with nearly half (49 per cent) of the smaller businesses we surveyed saying they chose to lock money away to build a cash buffer.

“Firms should feel reassured that by shopping around they can identify accounts which provide them with a wide range of terms and competitive rates of interest, in most instances higher than that which would be earned in a current account.”

The study revealed that SMEs are willing to tie up their savings for an average of eight months, one month less than in 2016. Hampshire Trust Bank offers a range of savings products from a 90 Day Variable Rate Business Notice Account to a 5 Year Fixed Rate Business Bond.