According to a new poll by the Institute of Chartered Accountants in England and Wales (ICAEW), many UK small and medium businesses are sitting on cash surpluses because they don’t yet feel secure enough to invest in infrastructure.
The survey of over 500 businesses found that two-thirds (62%) of small business owners have a cash surplus this year, but only 32% are using it to invest in growth. 38% said they are neither considering nor starting to invest.
This figure has not changed since 2013 when ICAEW last polled its members on this issue. In fact, more than 69% expect to have a cash surplus in 2016.
ICAEW director of business, Stephen Ibbotson, said, “The results suggest that businesses have learnt their lessons from the 2007 financial crisis. We have seen business investment slow down, and firms are now sitting on their cash and waiting for the right opportunity.”
According to ICAEW, these finding reflect a steep decline in business investment that UK Plc has experienced over the last few months. Over 37% of the businesses polled said that only an increasing confidence level in their prospects would encourage them to invest. More than 53% said they were looking for long-term assurances regarding the UK’s economic direction in the upcoming May 7, General Election before looking too far ahead.
The poll also found that 24% of businesses were holding 20% or more of their annual turnover in cash. Of the ones who are most likely to use their cash surplus in 2016, 66% said they will invest in IT infrastructure, 63% will spend more on training and development and 54% will spend on marketing.
According to Stephen Ibbotson, “We don’t want to see firms just battening down the hatches, which could stop our recovery in its tracks. The next Government should make it a priority to confirm the new rate of the Annual Investment Allowance as soon as possible. Businesses plan long term and waiting until December’s Autumn Statement isn’t quick enough.”