10 April 2015 09:00
Small firms are hoarding cash says ICAEW
Amid continuing economic uncertainty, businesses are sitting on cash surpluses and are unlikely to invest in infrastructure until they feel more secure.
These are the findings of a new poll by the accountancy body, ICAEW. It has found that 62% of those surveyed have a cash surplus this year. This figure has not changed since 2013, when ICAEW last surveyed its members on this issue. In addition, 69% believe they will also have a cash surplus next year.
According to ICAEW, this reflects the fall in business investment that UK plc has seen over the past few months. Over a third of firms polled (37%) said the single most important factor for them to invest again would be increased confidence in their prospects.
In addition, businesses are holding a larger proportion of cash – 24% are holding 20% or more of their annual turnover in cash. Of those likely to use their cash surplus in the next year, 66% say they will invest in for IT, 63% will spend more on training and staff development, and 54% will spend the cash on marketing.
Those not considering investing say that they require flexibility (50%) or are looking long-term (43%). Most respondents (70%) said that increased confidence in their business prospects would encourage them to invest; 52% were looking for long-term assurance about the UK’s economic direction.
The key findings in the survey are:
- 62% of businesses have a cash surplus this year;
- 69% believe that they are likely to have one next year;
- 36% of firms have started investing their surplus;
- 38% are neither considering nor starting to invest.
Stephen Ibbotson, ICAEW director of business, said:
“The results suggest that businesses have learnt their lessons from the 2007 financial crisis. We have seen business investment slow down, and firms are now sitting on their cash and waiting for the right opportunity.”
But he warned:
“We don’t want to see firms just battening down the hatches, which could stop our recovery in its tracks. The next Government should make it a priority to confirm the new rate of the Annual Investment Allowance as soon as possible. Businesses plan long term and waiting until December’s Autumn Statement isn’t quick enough.”