Tax & admin · 26 September 2017

Business owners continue to hold off investment and increase cash reserves

Brexit uncertainty was the biggest investment deterrent for business owners
Brexit uncertainty was the biggest investment deterrent for business owners

Almost two-thirds of decision makers at UK firms are continuing to preside over a cash surplus, new survey findings have suggested, as economic uncertainty weakens the appetite for investment.

In a nationwide study, chartered accountants ICAEW found that 28 per cent of business owners expected their cash reserves to grow even further in 2018. The number of founders presiding over a cash surplus has now remained steady over the past four years of the same survey.

The surplus size had also increased, ICAEW suggested. According to data from the Office for National Statistics (ONS), as of the first quarter of 2017, non-financial UK businesses held £655bn of currency and bank deposits, up from £587bn in the same period in 2016.

Uncertainty over Brexit was the single biggest factor discouraging the investment of surplus cash, with a majority of business owners awaiting clarity on Britain’s relationship with Europe before putting cash reserves back into their company.

However, domestic policy and global economic outcomes were also flagged by respondents. One in ten wished to see greater government commitment to tax incentives and relief for businesses, while seven per cent argued for relaxed planning policies.

Some 46 per cent were waiting for greater confidence in global markets, while four in ten cited low consumer confidence in the UK economy has creating uncertain conditions for businesses.

Commenting on the findings, Michael Izza, ICAEW chief executive, said business owners were “in no rush” to make major investments, and continued to “hoard” cash.

“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,” Izza warned.

Of those investing in their company, IT infrastructure was the most likely recipient of funds, with over two-thirds who were using cash reserves targeting their internal technology systems. Meanwhile, 58 per cent were investing in training and staff development.

“It is now up to [business owners] to support more growth,” Izza added.

“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.”

Read more: Brexit future-proofing means engaging with new markets, suppliers and customers

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Simon Caldwell is deputy editor at Business Advice. He has a BA in politics and communications from the University of Liverpool, and has previously worked as a content editor in local government and the ecommerce industry.


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