Thursday 18 August 2016 1:00 am

There's €1.1 trillion locked up in companies worldwide

Businesses could pad out their cash position if they could unlock some of their easier to access assets, research out today has found.

In a study of more than 13,000 businesses, PwC discovered companies across the world have €1.1 trillion (£950bn) in working capital, such as unpaid invoices and unsold inventory, which could potentially be better used. 

Looking at the 450 UK companies in the study, the professional services giant discovered £28bn in unlocked opportunity. 

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"Working capital is integral to a company's operation and can provide a real competitive advantage by creating value as it improves free cash flow," said Daniel Windaus, working capital partner at PwC. "Companies with poor working capital performance require more funding to grow, so it is in management’s interest to manage performance closely.

"Companies are in a period of uncertainty following the UK vote to leave the EU. Many lessons can be learned from the gains companies made in working capital management in the years following the 2008 financial crisis. Cash trapped in working capital has risen in the years since, indicating that companies should revisit the improvements they made then to release more of this cheap cash source."

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In light of June's Brexit vote, PwC expects more firms to start insisting on quicker turnarounds for their invoices and making more of an effort to shed excess inventory.

Despite the eye-watering figures, UK firms are generally better at getting cash flowing than their overseas counterparts, waiting less time to get their invoices paid.