The cash pile that is quietly costing your business 

Earlier in this series I wrote about how inflation and tax quietly erode personal cash that is not put to work. The same thing is happening, on a far larger scale, inside British companies. Businesses across the country are sitting on enormous cash reserves that earn almost nothing and lose value every year, and most owners have never thought of that cash as a problem, because the balance on the statement never falls. It is one of the most overlooked leaks in business finance. 

The scale of it 

The numbers are remarkable. Small and medium sized businesses in the United Kingdom are holding around £273 billion in low or no interest accounts. Of that, roughly £149 billion sits in accounts paying no interest at all, with most of the rest earning less than 2 percent. Because a great deal of business cash simply lives in the current account, it earns nothing while it waits. Taken together, this is estimated to cost businesses around £7.5 billion a year in interest they could have earned but did not. 

That is before inflation is even considered. A reserve earning nothing is not standing still. It is going backwards in real terms every year, just as personal savings do. 

What it means for one business 

The national figures are easy to wave away, so picture a single company with £250,000 set aside. Left in a near zero account while inflation runs at 2.6 percent, that reserve slowly loses its spending power. After ten years it still says £250,000 on the statement, but it buys far less. 

Illustration. Inflation 2.6%. Interest shown net of 25% corporation tax. Sector figures: Allica Bank; United Trust Bank. 

On the illustration, ten years of inflation quietly strips roughly £49,000 of spending power from a £250,000 reserve left earning almost nothing. Move the same money to an account paying a competitive rate and it broadly keeps pace instead, though only just once corporation tax on the interest is taken into account. That is worth sitting with for a moment: even a good account is doing little more than treading water, which is precisely why genuinely long term surplus deserves a different conversation. Meanwhile a business holding larger sums can be missing tens of thousands of pounds of interest in a single year. The cash has not gone anywhere. It is simply worth less, year after year, for no good reason. 

Cash still matters, so this is about the surplus 

Let me be clear, because this is important. Every business needs working capital and a healthy buffer for tax, wages, quiet months and the unexpected. That money should stay accessible, and no sensible plan puts it at risk to chase a return. The question is only about the surplus: the cash that sits well beyond what the business realistically needs to hand, month after month, doing nothing. 

For that surplus there are usually better homes. Sometimes it is as simple as a proper business savings or notice account rather than the current account it has drifted into. Sometimes, if the cash is genuinely long term, the better route is out of the company altogether and into your own wealth, for instance through the pension contributions I wrote about earlier in this series, which are highly tax efficient for owners. The right answer depends on when the business might need the money, and that is exactly the judgement worth putting to an independent financial adviser (IFA), who can look across the whole market rather than one provider’s shelf. 

Safe and easy to reach, at the same time 

A common worry is that moving cash out of the familiar current account means locking it away or taking a risk. It need not mean either. Bank deposits are protected by the Financial Services Compensation Scheme up to £120,000 per eligible depositor, per authorised bank, so spreading a larger reserve across several banks keeps more of it protected. Cash deposit platforms are built for exactly this. From a single login they place your money across a range of banks, keeping each balance within the protected limit, while still giving easy or instant access to the funds. These platforms usually take a small margin from the interest in return for the convenience, so the real draw is simple management and wider protection rather than the very top rate. Even so, for a reserve that would otherwise sit idle in a current account, the result is money that is both better protected and actually working. 

Where to start 

You do not need to tie anything up or take risks with money the business relies on. The useful first step is simply to separate your cash into what the business genuinely needs available and what is surplus, and then to make the surplus work rather than letting it drift. Our independent financial advisers at Bower Wealth help owners do exactly that, alongside your accountant, who will know your cash flow well. 

If your company has been carrying a comfortable balance for years without ever asking what it is doing, that balance is almost certainly working less hard than it could be. 

Bower Wealth is an independent financial adviser (IFA), whole of market and not tied to any provider. We work with business owners and families throughout the United Kingdom, including many close to home in Essex, Hertfordshire and London. Your first conversation is free and without obligation. 

SOURCES 

Figures are correct at the time of publication. 

1. 1.  UK small and medium sized businesses hold around £273 billion in low or no interest accounts, with roughly £149 billion earning no interest: Allica Bank.
2. 2.  The interest rate deficit is estimated to cost businesses around £7.5 billion a year; a business holding around £750,000 could miss more than £20,000 of interest in a year: United Trust Bank; Allica Bank.
3. 3.  Around 51 percent of SME cash reserves, about £264 billion, sits in current accounts: Allica Bank.
4. 4.  Bank deposits are protected by the Financial Services Compensation Scheme up to £120,000 per eligible depositor, per authorised institution, from 1 December 2025: Financial Services Compensation Scheme.