Deloitte: firms are hoarding £64bn cash pile
BRITISH companies are sitting on a £64bn cash pot built up by delaying payments to suppliers, a new study claims.
Research by Deloitte found that, on average, suppliers were paid four days later in 2011 than they were two years earlier in order to help companies amass funding for their daily cash flow.
This has lead to short-term improvements for UK firms but in the long term can lead to deteriorating relations with suppliers as they look to recoup losses by either reducing service or increasing prices, Deloitte warned.
Although working capital can be one of the cheapest and most accessible forms of funding available to a businesses, the report said that if companies stopped accumulating this cash, they could instead fund business growth or help overcome temporary market downturns.
“As the UK economy has technically entered a recession, cash and its effective use will continue to remain high on the corporate agenda,” said Andrew Harris, partner in Deloitte’s advisory development group.
The study drew on responses from UK-listed companies with annual sales greater than £60m.