The firm’s UK Working Capital Study identified a 3% year-on-year improvement in the working capital performance in a sample of over 3,000 UK companies with revenue of at least £100m. However, the research suggests this improvement is largely being driven by a smaller cohort of companies, while performance has actually fallen for 48% of those polled.

According to Grant Thornton, sustainable improvement in working capital arrangements has been an elusive aspiration as just 11% of those reviewed demonstrated working capital performance improvements for three years consecutively.

Over the past year, companies have made positive strides in improving their cash-to-cash days (a measure of the cash conversion cycle, relative to sales), from 31.6 days to 30.5 days. This 1.1 days improvement has delivered £8.8bn of cash to the balance sheets of the UK corporates sampled.

Whilst large corporates have historically kept tighter controls over their cash-to-cash days, this year it is the medium sized companies who showed the most improvement, whereas the larger segment of the sample deteriorated for the first time in four years. Smaller companies, faced with the continued challenge of reducing cash reserves and unfavourable macroeconomic conditions, show another year of improvements.

Mark O’Sullivan, partner and head of working capital advisory at Grant Thornton, said: ‘UK corporates have faced unprecedented uncertainty following the result of the referendum to leave the EU. The impact of this in both political and economic terms ranges far and wide, from currency fluctuations to import duties and trade tariffs; but the old adage that ‘cash is king’ still rings true and if these macroeconomic factors are going to impact UK corporates, it is the ultimate cash flow impact that will be hurt the most.

‘In the context of working capital, these uncertainties simply increase the need for companies to provide the right level of focus. Although companies will have a number of competing priorities, not having working capital on the agenda could prove most costly of all.’

Grant Thornton also found this year is the first time in five years that cash balances have decreased. Coupled with improvements in working capital and a five year high in corporate debt positions to £1.16 trillion, the firm says this suggests corporates have increasingly focused on investment for growth, utilising cash reserves and taking on debt to fuel development ambitions over the past year.

This is further evidenced by marginal (0.1%) growth in dividend pay-outs, a 3% increase in capital expenditure and increased merger and acquisition (M&A) activity, totalling around £120bn, excluding financial services.

O’Sullivan said: ‘It’s encouraging to see that companies are investing in growth at a time of such macroeconomic uncertainty.

‘Once the dust has settled and we know in more tangible terms what Brexit will look like and what it means for the economy, those firms that are positioned for growth will undoubtedly be best placed to capitalise on opportunities at home and in markets abroad, and weather any potential storms on the horizon.’

Grant Thornton’s UK Working Capital Study is available here.