Brexit uncertainty has resulted in businesses sitting on a cash mountain, according to an ICAEW survey, which found that two thirds of companies expect to have a growing cash surplus this year and next, and warns this is hampering investment decisions
The institute’s research shows that over a quarter of UK businesses think their cash reserves will grow next year. Nearly two thirds (61%) of those surveyed have a cash surplus this year, the same for the last four years, while 64% believe they will have a cash surplus next year too, and 28% thought the surplus for 2018 would be even higher.
Respondents said the single factor which would have the most impact in encouraging businesses to use surplus cash was more clarity on Brexit outcomes (19%). However government can also foster the right conditions that would encourage companies to invest by offering tax incentives and reliefs (11%) as well as relaxing planning policies (7%).
Over a third of respondents (37%) are neither considering investing or starting to invest their cash surplus in the next 12 months– the main reasons being a need for flexibility (49%), too much uncertainty (32%) and no opportunity for investment (30%).
Of those who have already used their reserve or thinking of using it, many are investing back into their IT infrastructure (68%), training and staff development (58%), and new technology (54%).
Among those with a cash surplus, confidence in the business environment is needed to encourage a major investment – with many citing more clarity on Brexit outcomes (55%), increased confidence in the UK (51%) and global (46%) economy, as well as more consumer confidence (41%).
Michael Izza, ICAEW Chief Executive, said: ‘Businesses are in no rush to make major capital investments at the moment and this is reflected in the amount of cash they are hoarding. But businesses should be investing now for the future and not for austerity. Without this investment, growth will continue to slow, especially as we can no longer rely on consumers to keep spending at the rate they were.
‘They need to look for opportunities in overseas markets, make efficiency savings and invest in innovation, talent, new products and services to create a longer term return – and this involves spending some of the mountain of cash they are sitting on.’
Report by Pat Sweet
