Growth under threat as small firms stockpile cash
Posted by Natalie Brandweiner in Finances on Mon, 31/10/2011 - 13:15
Almost half of small businesses are choosing to hoard cash rather than invest in growth due to economic uncertainty, new research has revealed.
Asset-based lender Venture Finance found 61% of businesses are holding onto an average of £190,000 as a buffer in case of financial difficulties.
Peter Ewen, managing director at Venture Finance, said: “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.”
Due to the lack of confidence in the economy, almost a third of small businesses are reluctant to invest and are biding their time for a change in the economic picture, the survey showed.
“The credit crisis has been a big knock to the British entrepreneurial spirit. A shift out of the recession mindset and an investment gear change could be just what’s needed for SMEs to steal a march on their competition and look towards growth,” said Ewen.
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