Businesses hold back on capital investment
Almost two thirds of UK businesses generated a cash surplus this year, according to research by the Institute of Chartered Accountants in England and Wales (ICAEW).
The survey of 500 ICAEW business members found that 62% have a cash surplus for this year, while 69% predict to have a cash surplus next year as well. Despite this, many businesses are holding back on possible investments until they feel more certainty about the direction the economy is heading in.
The ICAEW found that:
- 24% of businesses are holding 20% or more of their annual turnover
- 70% say they are not confident enough in their business prospects to invest
- 52% are unsure about the long-term prospects for the UK economy
- staff retention is prioritised above investment in plant and machinery among businesses that have invested.
Of businesses likely to invest over the next 12 months:
- 66% will develop their IT systems
- 63% will invest in staff training
- 54% will spend more on marketing.
The ICAEW's latest Business Confidence Monitor showed that 17% of businesses felt less confident about their prospects in Q1 2015, up from 7% in the same period in 2014.
Stephen Ibbotson, director of business at the ICAEW, said:
"We don't want to see firms just battening down the hatches which could stop our recovery in its tracks.
"The next government should make it a priority to confirm the new rate of the annual investment allowance. Businesses plan long term and waiting until December's Autumn Statement isn't quick enough.
"This will provide our growing firms with the confidence and impetus they need to take themselves and our economy to the next level."
Source - Gibson Hewitt