Cash is king for UK listed companies seeking security in face of global woes

By DOMINIC JEFF
Published on 09/07/2012 00:44

British listed companies are sitting on a cash hoard worth a total of about £19 billion as they hold off from investing due to the shaky economic outlook.

Research from corporate financial health monitor Company Watch found that 211 UK-listed non-financial companies are sitting on cash of at least 
£1 million each as worries over the eurozone and flagging global growth makes them unwilling to invest.

Companies in other Western European countries are holding even more money, although nowhere has as many hoarders as Britain. In total, European firms are sitting on £110bn net cash.

Nick Hood, head of external affairs at Company Watch, said firms were choosing cash for security.

He said: “All European economies are affected to some degree by the eurozone crisis and it looks as if the headlong growth of the Bric economies is faltering, so it’s hardly surprising that the bosses of our largest businesses view debt as dangerous and cash as comforting.

“This scenario will concern politicians across Europe, but in particular in the UK, where only investment can generate the growth needed to re-balance economies and reduce deficits.”

He said that, with the sovereign debt burdens of most countries inhibiting government spending for the foreseeable future, hoped-for growth will have to come from the private sector.

Company Watch said the attraction of the London market for natural resources and technology businesses may explain some of the concentration of cash-positive firms in the UK, but it also found businesses holding cash in sectors thought to be under pressure, such as retail and construction.

Construction giant Amec led the way with £521m, followed by fashion house Burberry, which has £338m in the bank. Argos and Homebase owner Home Retail Group has £194m stashed away and Carphone Warehouse has £103m.

The study coincides with a survey of chief financial officers (CFOs) from accountancy firm Deloitte, which showed worries about recession and a break-up of the euro are having a direct impact on the confidence, behaviour and business strategies of corporate Britain.

In the third major dip in CFO confidence in the last five years, 80 per cent said it was not a good time to take risk onto their balance sheet, while respondents saw an almost one-in-two chance of the recession in the UK continuing throughout the year, or recurring next year as a “triple dip”.