UK businesses sitting on £600 billion in excess working capital.
20/06/2019.
New research by Lloyds Bank has revealed that businesses could be sitting on £593bn in excess working capital, which could hamper growth and leave them exposed to economic uncertainty.
Analysis of nearly 9,000 firms revealed a total of £142bn is tied up in working capital, a £15bn rise on last year and a £41bn increase on 2015. When compared against historical and industry best levels of cash flow efficiency, and extrapolated across UK businesses with more than 50 employees, this equates to £593bn of excess working capital.
Working capital pressures dominated by stockpiling
The figures indicate stockpiling is the biggest contributor to the increased amount of cash tied-up in working capital. The data shows business inventory levels have risen every year since 2015, with firms investing more than £8bn this way in the last 12 months.
Stockpiling has led larger firms to increase inventory by 33% on average in the last three years. Aerospace and defence, industrial manufacturing and pharmaceuticals were among the sectors experiencing the fastest inventory growth.
Business and political uncertainty the biggest concern
Looking ahead, more than a third of firms (35%) said business and political uncertainty was the biggest concern affecting the way they plan to manage working capital in the year ahead. This was followed by changes to payment terms (16%) and stockpiling (15%), although this was heavily weighted to manufacturers.
Meanwhile, unpaid bills are also a concern for businesses, with data from Lloyds Bank showing that 65% are taking proactive steps to collect overdue invoices. According to the research, small firms typically have cash conversion cycles which are seven days longer than those of larger firms.
Ed Thurman, MD of Global Transaction Banking at Lloyds Bank, said: “Our research confirms businesses are stockpiling as a precautionary measure, in the face of political and economic uncertainty, to ensure they are in a strong position to face into any potential challenges. Such a deliberate response to an ongoing situation can be risky as cash invested in inventory is rarely easy to release meaning firms are less able to invest in growth or respond to unexpected changes in demand.”
Pressure most acute in manufacturing sector
The PMI data used as an early warning indicator in the bank’s research unveils overall pressure to increase working capital has remained relatively flat year-on-year, with a current UK reading of 104.9, against 104.6 in 2018.
Meanwhile, the reading for the manufacturing sector is at an all-time high of 130.7 against 111.0 in 2018. The UK’s services and construction sectors measured readings of 99.8 and 107.7 respectively.
A reading of more than 100 indicates pressure to devote more cash to working capital, while a reading of less than 100 indicates pressure to prioritise liquidity.
Lloyds Bank’s Index found that nearly a third (29%) of manufacturers cited stock build-up as their primary working capital concern, with businesses currently holding elevated stock levels which they plan to run down in the year ahead.
Regional variations
Businesses in the East of England have the greatest relative opportunity to free up cash with nearly 11% of total revenue currently tied up in working capital, having seen a 47% jump in inventory levels since 2015.
Elsewhere, those in London have the smallest relative opportunity (just over 5% of revenue), likely due to its weighting to the service sector, although even in London inventory levels grew 23% since 2015.
CPA is passionate about late payment
The Credit Protection Association has been protecting smaller firms against poor payment practices for over 100 years.
We are passionate about breaking the late payment culture that holds back the UK economy and threatens many SMEs with cash flow difficulties being the single biggest killer of Britain’s small businesses.
If you were regularly paid late we can help. Those former customers used you to boost their own cashflow, regularly paying you late.
As a result you had extra costs, you had the distraction of having to chase payment, you had opportunity costs because your capital was tied up in their late invoices.
Under little used legislation, you are entitled to compensation for those late payments.
Now you can boost your own cash-flow.
CPA can help unearth the those hidden treasures.
We have the technology to reveal the compensation you are due and we have the extensive experience and expertise to then turn those claims into cash.
Yes, CPA can help you boost your business cashflow.
Don’t let your bankers control you, contact CPA today.
If you are also struggling, do you realise you could be sitting on a fortune?
Late payments often result in a cash flow crunch and leave SMEs in need of a cash injection.
If you are struggling and sold B2B on credit then there may be a hidden source of capital you can call on.
If you need extra capital, rather than shutting down or jumping through hoops with your bank, you could look to uncover the resources from an unexpected source within your own business.
Not many are aware but there could be a hidden fortune within your business, sitting there, just waiting to be uncovered and released.
We can help you uncover the pile of gold, you didn’t even know you were sitting on.
If you trade with other businesses and were often paid late then you could be entitled to significant compensation.
Under little known and under-utilised legislation your business could be due huge amounts in compensation that you didn’t even know about.
Let’s be clear – this is not a way to weaken any customer relationships you value. It is one that identifies who’s been paying late and then recover the potentially significant sums in compensation using Late Payment Legislation from businesses where the relationship has already ended.
You can pick and choose who you want us to follow up – but once we’ve agreed which companies you’d like to pursue compensation from it’s a fast process and there’s no financial outlay to you whatsoever. My team at CPA put its expertise to work to recover the compensation due and fight late payment culture.
That compensation could be the cash rescue your business needed.
But don’t delay, that compensation evaporates if not claimed within six years of the late payment.
How can CPA help?
CPA has developed a unique technology to dig into your accounting records and discover the cash injection you are due by means of compensation. The software does all the hard work. Our software interacts over the cloud with over 300 different software packages, working directly with your accounts package, just so long as it’s stored on a computer.
We recognise that most companies do not have the resources to spend time on the identification and calculation of Late Payment Compensation. Our service can produce an Analyses within just a few days with (usually) less than 30 mins of co-operation from our clients. We work directly with over 300 accounting packages but can also work with bespoke accounts packages. Indeed, speed is essential as the oldest invoices may fall foul of the 6-year time limit.
Once the Sales Ledger Analyses is made available to clients, all that is required is that management decide which commercially sensitive ex-customers to remove from the list and return it to us.
CPA then uses its years of collection experience to explain and recover the Late Payment Compensation Claims. Clients do not handle any part of the recovery process as our team will take all communications from the companies against who the claims has been made. Often, it’s simply a case of explaining the legislation, sometimes we have to go all the way and enforce the legislation through the courts.
The result is that we are realising clients’ claims worth tens and sometimes hundreds of thousands of pounds which, of course, is pure net profit. You may also be among the recipients of “hundreds of thousands of pounds” should you elect to take advantage of our services.
We do the work, you receive the cash.
If you have supplied goods and services to businesses on credit and were regularly paid late then you could be due significant sums in late payment compensation.
We are talking to companies and unearthing claims in the hundreds of thousands from former business customers who paid them late. Large business customers who abused their power to inflict unfair and sometimes illegal payment practices.
We are helping companies that were looking to close down, who looked insolvent and finding that cash injection they need to avoid insolvency.
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
Do you sell on credit?
With pressures on the UK economy it is essential that you stay on top of the credit limits you grant customers and watch carefully for any late payments.
With tightening cash flow they will look for the easiest option to boost their cash-flow. Don’t let it be you.
You can’t just assume your customers can and will pay you, no matter how big their name is.
It is essential to have credit management systems in place to monitor and check your customers credit worthiness.
It is also best practice to use a trusted third party like CPA to make sure you are paid on time by customers, no matter how good a name they have.
See the section below – About CPA.
About CPA
The Credit Protection Association can help!
Formed in 1914, CPA has been providing credit management services to SMEs for over 100 years.
At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.
We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports however predict approximately 96% of company insolvencies long before they arrive.
Companies in trouble usually have very bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.
If you supply on credit, help us help you identify the risks.
Why use a third party collector?
As a third party collector, we can also get your payments prioritised over those who are not as hot on collections. When you customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.
Over the years we have collected billions in overdue invoices for our customers.
Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!
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