UK’s small firms are hoarding cash

Small businesses across the UK are hoarding finances and reducing investment, according to new research from Lloyds Banking Group.

The Bank claims that uncertainty surrounding the UK’s position in the EU is worrying businesses, which has seen many plan ahead by keeping some money in reserve.

According to the study, a business with a revenue of under £1 million expects to invest around £21,700 into the business in the next six months – a drop of 74% compared to July 2016.

It marks the highest percentage fall since the Bank introduced the question relating to investment plans to its six-monthly Business in Britain survey several years ago.

A major concern for analysts is that growth will suffer as a result of a lack of investment, with firms unprepared to take risks to succeed.

While keeping finances aside to protect against economic issues is to be recommended, doing it to too greater extent could damage growth prospects for the UK.

Undertaking an independent business review should reveal options that could be considered, especially if a business has suffered a reversal in fortunes.

Alternative finance options to help raise finance if required, which may prove useful if firms are not willing to set aside cash or impact on their growth prospects.

Small businesses have also looked to tackle debts and overdrafts in order to gain a clearer financial picture ahead of the UK leaving the EU.

It is predicted that business sentiment will dip when the formal process of negotiations begins, with Lloyds adding that economic uncertainty is viewed as the main threat to business in the coming months.

Political uncertainty and weaker demand for UK products may also have an impact while research from Aldermore Group has highlighted cash flow concerns as well.

With late payments a widespread issue, small businesses are concerned that they could face considerable financial difficulties should the economy be badly effected by leaving the EU.

By Phil Smith

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