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Construction SMEs investing less in savings

Saving for a rainy day

Small and medium (SME) sized construction firms are bottom when it comes to saving, according to new research.

Research from specialist challenger bank Hampshire Trust Bank has shown that construction SMEs save on average £319,000 compared to accountancy SMEs, which hold an average of just over £1M in savings and are the biggest business savers.

The bank said that while accountancy and IT and communications businesses had the largest savings pots, charities were the most active savers – investing 77% of total funds in business savings. The national average for business savings is £556,000 – 57% of an SME’s total funds.

Following the outcome of the EU referendum, the bank found that half of businesses in the construction and building industry said they were increasing the amount of cash in their firms to build a cash buffer, significantly higher than the national average of 38%.

However, the findings showed that only 4% of construction SMEs said they were increasing cash reserves due to concerns about the UK’s economic outlook – lower than the national average of 12%.

“Our study demonstrates the sector differences when it comes to the amounts businesses and organisations are holding in current and savings accounts. It’s encouraging to see charities and architects are confidently planning for their future, by placing the majority of their total funds into savings accounts,” said Hampshire Trust Bank director of savings Stuart Hulme.

“The organisations that have been stockpiling cash into current accounts should consider the opportunities to make more out of every £1 earnt.”

Hulme added that the benefit of using savings accounts was not only the interest rate return obtained as a business, but also the knowledge that the money was being lent to SMEs looking to grow. This, he said, delivered double value and supported investment in the UK.

Business savings amounts by sector:

Sector2016 Business Savings Account (% of total funds)2016 Current Account

Accountancy

£1,085,000 (63%)

£625,000

IT and communications

£804,000 (54%)

£690,000

Architecture

£708,000 (69%)

£312,000

Financial services

£687,000 (56%)

£529,000

Manufacturing and engineering

£543,000 (54%)

£454,000

Health and medical

£504,000 (50%)

£513,000

Charities

£497,000 (77%)

£145,000

Retail

£418,000 (68%)

£198,000

Legal

£354,000 (60%)

£235,000

Construction and building

£319,000 (51%)

£304,000

NATIONAL AVERAGE

£556,000 (57%)

£423,000

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