Allica Bank: SMEs Lose 2.83% in High Street Savings Gap
High street banks continue to offer small and medium-sized enterprises (SMEs) low interest rates on their savings, with rates falling further following the Bank of England Base Rate reduction in February.
Allica Bank, a UK-based challenger bank focused on established SMEs, has been monitoring average savings rates through its independent Monthly Savings Tracker since January 2023, comparing rates offered by traditional banks to those from challenger institutions.
Research for Q1 2025 reveals a persistent savings gap of 2.83% in February. This difference means SMEs keeping funds with high street banks are forgoing substantial returns.
Rate disparity between SMEs and corporates
While the savings gap has decreased slightly since the previous quarter, this follows high street banks reducing their SME interest rates to 1.28% on average.
Simultaneously, these same banks offer corporate customers rates that are 2.9% higher than those available to SMEs.
Challenger banks are positioning themselves as SME advocates by maintaining competitive rates.
In February, SMEs could earn up to 4.11% on identical deposits by banking with a challenger institution.
This gap translates to £2,123 (US$2,700) in annual interest for businesses with average savings of £75,000 (US$97,000).
For established businesses with £1m (US$1.2bn) in deposits, this amounts to £28,300 (US$36,600) in additional funds annually by switching banking providers.
With 5.5 million SMEs operating in the UK, Allica estimates that UK small firms are missing out on up to £9bn (US$11,6bn) annually in interest payments.
“While large corporates are getting premium rates from the big banks, many UK SMEs are acquiring little to no interest on their savings"
Market transparency issues
The difference in interest rates offered to companies of varying sizes stems from high street banks capitalising on market opacity.
These institutions exploit the fact that small business owners rarely have time to compare options, unlike corporate treasury departments.
Allica Bank is advocating for a review of the savings market to redirect funds from banks to small business owners.
The bank recommends that government and regulators require high street banks to inform SME customers about top market rates and where to find them.
Richard Davies, CEO of Allica Bank, says: “We started this research in 2023, and in 2025 it's clear that the SME savings market is still broken.
“While large corporates are getting premium rates from the big banks, many UK SMEs are acquiring little to no interest on their savings.
“With little market transparency, SMEs are often left unaware that challengers are offering them far better rates.
“It's time for this to change, so that SMEs can get a fair deal, helping their businesses to thrive and releasing billions of pounds into the real economy.”
Industry campaign for reform
Allica Bank has previously called for a government and regulatory investigation into the business savings market.
The bank has formed the Great British Savings Squeeze campaign in partnership with the Federation of Small Businesses (FSB), Institute of Directors (IoD) and British Independent Retailers Association (BIRA).
This initiative seeks an investigation into the business savings market, focusing on structural reforms to ensure SMEs receive fair returns.
The campaign advocates for ending preferential treatment of corporate customers over SMEs, requiring banks to notify SME customers of competitive market rates and increasing deposit protection through the Financial Services Compensation Scheme to give small firms confidence when making large deposits.
Richard adds: “This is especially the case for the established businesses that Allica serves. They will typically have larger sums of cash on their balance sheet, which could see them missing out on tens of thousands of pounds.
“That kind of money could really help take some pressure off business owners at a time when costs have only been increasing.”
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