New Investec research shows nearly three out of four (73%) UK, corporates and large SMEs are looking to strengthen cash reserves as part of the long-term switch in risk management, so they are in better shape for any future crisis (please see the attached press release).
The change in policy and planning builds on experience during the Coronavirus crisis which has seen companies substantially boost cash reserves – Investec’s research shows one in six (16%) say their cash reserves are now at an all-time high.
Other key findings include:
Its study among 100 senior executives at corporates with total cash deposits of more than £6.17 billion and average reserves of around £62.3 million found 58% had seen cash reserves increase over the past year. Around one in five (17%) say reserves are 40% or more higher than last year.
The research for Investec found that for those companies that have seen cash reserves rise, the main reason for this was that their revenue had increased during the Coronavirus crisis. Around 58% say this, but more than half (51%) say cancelling investment projects has boosted reserves while 44% attribute increased reserves to cost-cutting.
Around one in three (34%) have sold assets while 17% say Government crisis loans mean they have more cash.
Companies generally say they have cut back on investing in their operations during the crisis with 82% confirming this. Around one in five have reduced investment by 20% or more compared with two years ago.
Investec’s study found not all companies have seen cash reserves increase – 38% say they fell during the past year with 9% saying they are 30% or more lower. Around three-quarters (73%) of corporates and large SMEs who have seen their cash reserves fall say it is because they used it to fund operations, while 58% had to use the money to fund projects they were committed to but no longer had all the funding for because of the crisis.