New research has revealed that UK businesses are sitting on £155 billion in dormant funds, missing out on an estimated £124 billion in potential returns over five years. Analysis from investment platform InvestEngine highlights that a significant portion of the £560 billion held in UK business bank accounts is accruing no interest or investment returns, despite opportunities for companies to grow their savings through investing.
The data, based on the latest Bank of England figures, shows that over a quarter of the total amount, £155 billion, is in accounts that yield no returns. This issue is particularly notable among SMEs, which collectively hold £223 billion in deposits, with £62 billion potentially languishing in non-interest-bearing accounts.
Despite the vast majority of UK SMEs (93%) using business bank accounts, few of these accounts offer interest on their balances. Companies that do not require immediate access to their cash could potentially benefit by transferring funds to investment accounts that yield higher returns. InvestEngine’s calculations suggest that, if businesses invested their idle cash, they could earn a collective £124.3 billion in returns over five years. SMEs alone could stand to gain £49.7 billion.
Alternative Investment Options
Businesses that require quicker access to their funds could still explore investment opportunities like Money Market ETFs, which offer higher returns than traditional savings accounts by matching the Bank of England’s average overnight interest rate (currently 5.20%). These short-term investments carry lower risk compared to other options and can help businesses protect their funds from the effects of inflation.
However, according to InvestEngine, only 8% of SMEs have an additional account beyond their primary bank account. The company’s Head of Investments, Andrew Prosser, emphasised that businesses are missing out on significant financial opportunities, especially during challenging economic times. He stated, “If businesses put their money in accounts that accrue interest or investment returns, they could collectively be up to £124 billion better off after five years.”
He added that Money Market ETFs offer a safer option for businesses that need access to cash while still generating higher returns than cash savings. “For more cautious investors, these are a far better option than leaving their funds at the mercy of inflation.”
Making Money Work
InvestEngine offers business accounts designed to help companies invest surplus cash in exchange-traded funds (ETFs). These accounts can be managed directly by businesses or through InvestEngine’s managed portfolio, which charges lower fees than others on the market. Companies can start investing from as little as £100, with no fees on DIY portfolios and a 0.25% charge for managed portfolios.
Ian Durrell of Ask the Boss, a London-based accounting firm, shared his experience of moving to InvestEngine. “Our cash was left sitting in a bank, generating no returns or interest. When we transferred our balance to InvestEngine, we put our money to work through low-cost, low-risk investments, creating the potential for higher returns.”
With the right tools, UK businesses could unlock a significant portion of the funds currently sitting idle, contributing to financial stability during a time when many small businesses are struggling to stay afloat.
