The analysis conducted by the Centre for Economics & Business Research (CEBR) and polling firm YouGov reveals that as a whole UK SMEs are set to miss out on £4bn in interest over the next year due to failing to shop around for a better deal.
Nearly one in three (32%) construction companies in the UK earns less than 0.1% on their cash savings despite the best paying instant access deposit account offering a return of 1.4% and the best fixed term deposit accounts offering returns of up to 2.5%.
The study, commissioned by Flagstone, a savings account comparison site, found that in the three years since the EU referendum 49% of UK construction firms have increased their cash balances.
But although 64% admit that they are unhappy with the average rate of interest they receive on their cash deposits, few can be bothered to shop around for better deals, the report shows.
Small businesses currently hold £191bn in instant-access accounts and receive an average rate of 0.41%, which means they are on track to earn £566m in interest in the coming year, CEBR’s analysis found.
However, if they were to switch to a market leading instant-access rate of 1.4%, they would earn £2.7bn in total in the next year – £2.1bn more than they are currently expected to earn.
UK SMEs currently hold £141bn in fixed-rate deposit accounts earning on average 0.86%, meaning they are expected to earn £1.2bn in the next 12 months. Switching to the market-leading 2.5% one-year fixed rate would deliver £3.5bn in collective interest in the coming 12 months – £2.3bn more than they would have otherwise.
Andrew Thatcher, co-founder of Flagstone, said: “This study shows that inertia in respect of cash deposits is a significant issue for UK SMEs and specifically for the construction industry. Nearly half of companies in the sector have increased their cash reserves in the last three years, 40% are very dissatisfied with the rate of interest they’re earning and 91% are earning less than the current Bank of England base rate.
“Each year, companies are missing out on billions of pounds of interest income because they are not proactive in moving their money, often citing the process of researching and opening new accounts as prohibitively complex and time consuming.
“Firms that forego this extra cash could be missing out on the chance to increase profit, grow their business by hiring extra staff, or invest in productivity improvements. This may also be damaging to the UK economy.”