SMEs sitting on cash
Oct 26 2011
A surprising number of businesses are holding onto cash
Almost half of small and medium-sized enterprises (SMEs) are sitting on cash and not investing it because of the uncertain economic climate, research finds.
Some 47 per cent of businesses are holding on to investable cash not needed in their day-to-day operations, according to a study of 500 business owners by asset-based lender Venture Finance.
Those holding on to investable cash are keeping an average of £190,000 in the bank.
Almost two thirds (61 per cent) of SMEs say they are holding on to cash as a buffer in case of future financial difficulty, rather than investing in growth.
Venture Finance managing director Peter Ewen says, ‘In the aftermath of economic crisis, business owners appear to be building up their war chests and waiting for clearer economic skies. But this could become a vicious cycle, sending everyone back into the doldrums.
‘If SMEs can shake off this cautious mood and grasp the increasing growth opportunities available, it could be a great boost for them and for the UK economy.’
More than two thirds (67 per cent) of businesses admit a lack of confidence in the economy.
Almost half (45 per cent) feel that the economy is too uncertain to invest in growth with many (37 per cent) putting off growth and waiting for a change in the economic picture.
As a result of reduced confidence, almost a third (31 per cent) of UK SMEs have no plans to grow and over a quarter (28 per cent) are not planning to invest in growth within the next 12 months.
Ewen, comments: “Prudence is obviously important in uncertain times, but SMEs could be taking this too far. Businesses have to ensure they aren’t watching prime business opportunities to expand or even acquire pass them by.
“While we’ve seen tentative organic growth amongst our customers, it’s important that SMEs ready themselves to seek-out and grab hold of growth when it comes knocking.”
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