About a quarter of businesses with an annual turnover of £1 million or more hold a total of £4.65 billion in cash despite rising inflation because they have cancelled or postponed business development, new research shows.
About a quarter of businesses with an annual turnover of £1 million or more hold a total of £4.65 billion in cash despite rising inflation because they have cancelled or postponed business development, new research shows.
The amount, which totals to an average amount for each business of £86,020, highlights the sense of unease being felt amongst growing companies about future economic prospects, and comes on the back of a surprise record jump in inflation in the UK.
The BDRC Continental survey of 241 businesses with an annual turnover of £1 million or more, commissioned by Investec Bank, estimates that companies across the UK have around £56.756 billion in deposits with banks.
The survey shows 11 per cent of businesses surveyed have under £10,000 on hold as a result of cancelling or postponing business plans, while 7 per cent have over £100,000 stashed in their accounts waiting for business conditions to improve.
According to the survey, 4 per cent have between £10,001 and £50,000 and another 4 per cent have between £50,001 and £100,000. Half report that they don’t have any money on hold, while 24 per cent say they don’t know.
The survey also highlights the tough choice for business managers of whether to spend money or invest despite the continuing economic uncertainly, or lose money by saving because of increasing inflation.
The Office for National Statistics yesterday reported that the Consumer Price Index (CPI), the official measurement of inflation, has increased at a record rate in the year to September.
The CPI rose to 5.2 per cent last month from 4.5 per cent in August. It is now at the highest point since the measurement was introduced in 1996, and equal to the peak in September 2008.
The cost of living, measured by the Retail Price Index (RPI), which includes mortgage payments, increased to 5.6 per cent in the same period, up from 5.2 per cent in August, the ONS said.
Investec Bank head of savings Linda McBain comments, ‘With the Bank of England base rate at 0.5 per cent, many business deposit accounts are paying low returns, in many cases much less than 0.5 per cent. Indeed, our research shows that 32.4 per cent of business deposit accounts are paying 0.1 per cent or less on balances of £50,000.90.’
