SMEs could save cash by better engaging with UK banking market, says study

Small and Medium-sized Enterprises (SMEs) are “not engaged enough in the banking market” and could be paying more than necessary for their account, according to a new report examining the current and future state of UK banking.

The report, published by the Competition and Markets Authority (CMA), found that UK SMEs wrongly believe that “remaining loyal to a bank will be beneficial, in particular in relation to future lending decisions”.

It said: “There is also a perception among SMEs that potential gains from switching are not high, and that there is limited differentiation between banks”.

However, contrary to common beliefs, the report pointed out that SMEs could be more likely to benefit financially from switching their bank account, based on their business needs.

“[Common] perceptions are not borne out by our business current account (BCA) pricing analysis, which found significant differences between the highest and lowest monthly costs of a BCA for almost all our customer profiles,” the CMA’s report read.

“Whilst our estimates should be interpreted carefully, our BCA pricing analysis suggests that, in Great Britain, SMEs could save around £80 per year on average by switching to the bank that was cheapest based on their transaction behaviour,” it added.

Intelligent spending, profitability and tax-efficiency are crucial to SME success. Businesses are advised to consult tax experts and business advisors for tailored advice, before making important decisions.