Member Article

Businesses choose reserving over reinvesting

Almost a third of business owners are choosing to retain high cash reserves, rather than reinvesting back into their business or returning money to investors.

This trend has been attributed to the lack of available credit from banks, which has forced companies to reevaluate how they manage their balance sheets and profits.

Ashley Whipman, director of Robert Half Management Resources (UK), commented: “It is not surprising to see that businesses are reserving cash during this period of uncertainty.

“UK businesses are still finding it difficult to secure finance and credit to help support business growth, which is adding further pressure on the UK economy.

Over a quarter of those stockpiling cash cited difficulty in securing finance, but a further 16% said they were saving money to facilitate future expansion.

This shows that while businesses are being cautious, mergers and acquisitions are still on the agenda for many businesses, with 8% planning to use profits to expand in this way.

However, larger businesses are struggling, with 35% choosing to keep cash in reserve to combat the current credit squeeze.

Over a fifth of all private businesses questioned in the Strategic Priorities for UK Businesses report were nervous about the ongoing financial difficulties in the euro zone, with the figure hitting 50% in the public sector.

Mr Whipman concluded: “Cash flow is clearly a concern for many CFOs and with four in 10 companies planning to increase investments in the next 12 months, it is essential that companies have a clear financial strategy to maximise returns during this era of uncertainty.

“Many companies without the requisite talent to manage strategic initiatives in-house are turning to senior-level finance professionals on an interim basis to provide financial guidance and leadership.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .