Investments climb back to pre-pandemic levels with cash reserves playing key role
Despite economic pressures and a recession looming, nearly half of corporates and large SMEs expect business investment to return to pre-crisis levels by the end of this year as business gets back to normal.
According to a new survey shared exclusively with CityAM today, just 16 per cent expect to take three years or more for the investment recovery with 35 per cent saying they will be back at pre-crisis levels by 2023.
The research found cash reserves will be a major source for increased investment, according to the study by Investec among 100 senior executives at corporates with total cash deposits of more than £6.17bn.
More than half of companies questioned expect cash reserves to fall over the next six months with 11 per cent predicting a dramatic drop in cash reserves driven mainly by the return to business as usual.
Of those companies who expect their cash reserves to fall, 81 per cent say it will be because they will use it to fund significant growth plans, while two-thirds said they need to access cash reserves to pay for growth and increased costs as they return to normal.
Around 17 per cent said their cash reserves will fall because they must repay Government loans accepted during the crisis.
“Many companies have built up significant cash reserves during the crisis and as the economy returns to normal to an extent will start to run down cash balances,” commented FJ Eigelaar, head of Client Group Funding at Investec.
“More than half of firms expect cash deposits to fall and most expect investment in operations and their businesses to return to pre-crisis levels over the next year or two,” he added.
“That underlines the need for flexibility and planning in handling cash reserves and Treasury departments will need to balance how they do this this after 18 months which have seen many piling up cash,” Eigelaar noted.