Warning over firms' £31.5bn '˜cash mountain' danger

Scottish businesses have at least £31.5 billion tied up in excess working capital which could be hindering investment or efforts to cut debt, according to a new report.

Having a mountain of cash locked away 'could spell danger' in uncertain times, warned Bank of Scotland's Colin Walls. Picture: John Devlin

The Bank of Scotland, which compiled the figures, warned that holding too much working capital – particularly stock – could leave firms exposed if the economy deteriorates.

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A new six-monthly index launched by the bank uses data from its Scotland regional purchasing managers’ index (PMI) report to calculate the pressure businesses are under to either increase or decrease working capital.

Although the figures suggest firms have begun reducing their working capital in recent months, Colin Walls at Bank of Scotland said the figures highlighted that more could be done.

“Having a cash mountain locked away at times of uncertainty, or if the economy falters, could spell danger,” he warned.

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