UK small and medium-sized businesses are moving more cash onto savings platforms as they look for higher returns, wider deposit protection and faster access to funds, according to new figures from Flagstone.
The London-based cash deposit platform reported that direct deposits from UK SMEs rose 77% year on year in the 12 months to 30 November 2025, from £1.6 billion to £2.9 billion. Flagstone said 7,500 UK businesses now manage more than £5 billion on its platform, including both direct deposits and money placed via intermediaries such as financial advisers.
Stubborn inflation, tighter access to borrowing and concern over tax and wage costs have pushed cash management higher up the agenda for business owners. Many are relying more heavily on cash reserves as they weigh up decisions on growth, restructuring or potential sale of their companies.
FSCS protection gaps
Flagstone’s research among 200 UK SMEs indicated that business leaders now prioritise three areas for cash: protection from bank failure, income generation and liquidity.
Under Financial Services Compensation Scheme rules, only up to £120,000 held with any one banking institution is protected for an SME in the event of a bank failure. Any sum above that level with a single bank is not guaranteed.
The research found that 67% of SMEs keep their savings with only one or two banks. Flagstone said this concentration suggests that many firms with cash reserves above £240,000 may hold substantial balances that fall outside FSCS protection.
The issue is more acute among larger SMEs. The data showed that 99% of companies with £500,000 to £1 million in cash hold their funds with four or fewer banks. Flagstone said this pattern indicates that as much as 52% of their cash reserves may be unprotected if a bank fails.
Returns on reserves
Business owners are also seeking more income from cash as credit remains constrained. Many SMEs still rely on traditional banks for deposits. Flagstone’s research found that 51% of SMEs save almost all their cash with high street banks, which typically pay lower rates than newer rivals.
A further 38% of respondents split their deposits between challenger banks and high street providers. Data from challenger bank Allica, a Flagstone partner, indicates that SMEs receive savings rates from challengers that are on average almost 3 percentage points higher than rates from major high street banks.
On a £100,000 deposit, that rate gap can translate into nearly £3,000 more in annual interest for the business. The figures underline the potential uplift in income when firms diversify savings away from current accounts or low-yield accounts at large banks.
Liquidity trade-offs
Maintaining quick access to cash remains critical for SMEs operating in a volatile economic environment. Many companies hold a high proportion of funds in current accounts so they can draw on them without delay.
Allica reported that 51% of total SME cash reserves, worth about £264 billion, sits in current accounts. That structure supports immediate access but often delivers no interest, as most business current accounts pay no return.
By contrast, a leading easy access business savings account currently pays more than 4% interest, according to market data cited by Flagstone. Businesses that maintain large current account balances may therefore forgo significant income in exchange for instant liquidity.
Platform behaviour
Flagstone said typical SME customers on its platform spread deposits across multiple banks and account types. The average SME client holds about £700,000 across seven savings accounts with more than 40 banking partners available.
Flagstone stated that an SME can place almost £5 million across its panel and still remain within FSCS limits, because deposits sit with different regulated banks. It added that 96% of SMEs with up to £500,000 deposited on the platform have full FSCS protection on their balances.
On average, SME users keep 42% of their Flagstone balances in easy-access accounts and 14% in notice accounts. They hold the remaining 44% in fixed-term deposits. Three-month maturities are among the two most popular fixed-term options for SME customers.
Flagstone said this mix reflects business demand for a blend of instant or near-instant access and higher yields from term deposits, while still managing FSCS coverage across multiple institutions.
Budget backdrop
Flagstone’s Chief Financial Officer, Lakhbir Sandhu, said many SMEs felt recent fiscal measures had not addressed their financial pressures. The comments followed a period of concern among business groups about inflation, tax changes and employment costs.
“Whilst the recent Budget did not throw many new and unexpected curveballs at UK SMEs, it also did not provide solutions to the problems these businesses are facing. Active management of cash reserves is going to be even more essential in 2026, building on the momentum we have seen in the last year alone. More SMEs need to make sure their money is secure, it’s working as hard as it can for them, and it’s liquid enough to access when needed,” said Sandhu, Chief Financial Officer, Flagstone.
Sandhu said SME leaders face time and resource constraints as they reassess financial strategies.
“Time-poor, pressured SME leaders are crying out for solutions that make financial management easier and more lucrative. The appeal of convenient, time-efficient and protected cash management – that cash platforms provide – is spreading fast among UK SMEs. Much of Flagstone’s adoption by UK businesses has been driven by word of mouth, simply because the formula works and businesses love using it. As external pressures continue on UK SMEs – the backbone of our economy – we’re equipping ourselves to serve more UK SMEs with the support they deserve to make sure every penny works hard for them,” said Sandhu.