This launch coincides with Lightyear's analysis of new Bank of England data, which reveals that British businesses collectively hold nearly half a trillion pounds in cash, yet most of it earns negligible interest.

Current options for businesses to maximise their cash are limited

SMEs, representing 99% of all UK businesses, often lack access to accounts that enable their funds to grow, a privilege typically reserved for larger corporations. Business accounts at traditional banks are difficult to obtain and offer minimal interest. Even when smaller businesses gain access, they face lengthy and complicated processes to invest in the stock market.

Recent fintech solutions have not fully addressed these issues. Many still restrict certain business types, particularly SMEs, from opening accounts, and impose strict deposit requirements, high fees, and uncompetitive interest rates. Available interest-earning products often include fixed rates and numerous service fees, diminishing the actual value returned to customers.

Consequently, nearly half a trillion pounds of business savings earns almost no interest. Lightyear's analysis of Bank of England data, published on 01/07/24, shows that businesses now hold more cash than credit. The amount of money held in deposits by private UK businesses has been increasing since 2008, with a notable rise since COVID, and continues to trend upward. In May, businesses held £562 billion in deposits compared to £449 billion in credit.

Despite businesses having over half a trillion pounds that could be earning interest, £426 billion (76%) sits in savings or current accounts with an average interest rate of just 1.7%.

This is in spite of the Bank of England maintaining a base rate of 5.25% in its latest decision.

With interest rates projected to remain above 4% for the next five years, Lightyear is urging British businesses to reconsider where they keep their money and seek alternatives that offer higher returns. The company is launching business accounts specifically designed to help them achieve this goal.

Andy Davis is the owner of small business ‘The Investors Media Company LTD’, where he writes about finance for various clients. He’s one of the first beta users of Lightyear’s business accounts, which are launching today: “I knew how valuable money market funds could be for my company because of my work as a freelance finance writer. But this is the root of the problem: you shouldn’t have to have a business in the finance industry to know about this. All small businesses should have access to straightforward business accounts that follow the Bank of England rate. But that option hasn't existed until now. I previously used an account from my bank that put my cash into money market funds, but I had to give a month's notice to withdraw and the rate I received was less than half the Bank of England's base rate. That defeats the purpose. I need to earn as much interest as I can on my company's money, but it also needs to be properly liquid so I have an easily accessible cushion for quiet periods to smooth out my cash flow. With the account that Lightyear offers, I get the same deal as big companies that have been using money market funds for decades. That's a massive step forward for small businesses like mine."

Lightyear unlocks access for SMEs to a product traditionally reserved for large corporates

The fact that 76% of all business deposits sit in savings accounts with low rates indicates that businesses either aren’t looking around for deals that provide a better return on their money, or that there aren’t enough providers offering better. Businesses need somewhere to park their cash where it’s easily accessible, so they can jump on opportunities to grow and maintain positive cash flow.

Lightyear’s launch of business accounts will help companies in the UK make the most of their company funds, ensuring that excess corporate cash isn’t eaten up by inflation while sitting in bank current accounts.

The neobroker will start offering businesses 5.14% AER on GBP, through their new treasury product; money is held in Money Market Funds (MMFs) by BlackRock – the world’s largest asset manager by AUM (over $10 trillion); these are highly liquid, low investment risk funds, traditionally reserved for large corporates who can buy in with a £1 million minimum investment. These funds track the Bank of England base rate, a privilege also usually reserved for larger companies.

Lightyear’s easy access, flexible and high interest treasury product helps British businesses make the most of the globally high base rate across three major currencies without constant foreign exchange fees, paying 5.14% AER in GBP, 5.38% in USD and 3.60% in EUR (as of 24.07.24). All three currencies will be the highest available interest yield for businesses on the platform, giving overnight interest that accrues daily and pays out monthly.

The neobroker also offers 4.5% interest on businesses’ uninvested GBP (variable), but their treasury product allows businesses to benefit from an even higher interest rate than this on all three currencies, due to holding money in the AAA-rated money market funds by BlackRock.

Lightyear will give businesses of all sizes access to their treasury product, without the traditional £1m minimum investment criteria. In fact, they’ll be no minimum deposit (or maximum deposit) criteria for a business to use the platform. There’ll also be no account management fees, and the same low pricing that Lightyear's retail customers get (with free ETFs). There’s a simple and flat 0.25% fee (same as for retail customers), but all numbers shown are net of fees (so the 5.14% AER is the actual amount businesses on Lightyear will receive). The rates are variable and subject to change.

As well as providing interest via money market funds and on uninvested cash, on the investing side Lightyear will give businesses access to 3,500+ international stocks and ETFs across the US, UK & Europe. Lightyear launched in the UK for retail users in September 2021.

Martin Sokk, Co-Founder & CEO of Lightyear: “There’s lots of talk around how banks don't pass on high rates to consumers’ savings. But what about businesses' savings? The narrative around SMEs is dominated by problems they face trying to get finance; people presume SMEs don’t have money to put to work. But, as our analysis proves, they certainly do. British businesses now have more cash than credit. What's shocking is that nearly half a trillion pounds of it earns 1.7% interest. With the current economic situation, it's incredibly important that businesses become smart about where they put their cash. But existing options for them to do this are practically non-existent.

“At Lightyear we've worked hard on making sure our retail customers can grow their wealth, so with today's launch of our business accounts, I'm excited to do the same for SMEs. The market is certainly in need of a huge shake up.”