Companies enjoying boost in cashflow

It's long been widely known that investment is the best way to catalyse economic growth, but in the midst of a recession so enduring as the one that the UK has just started to pull itself out of, it can be difficult to find the liquid cash.

With this in mind, many firms adopt an approach of austerity in the hope that this will give them the staying power to weather the storm, reports Financial Director. What's more, if they do manage to make the shrewd savings they desire and end up with a build-up of hard cash, then this will give them more room to manoeuvre when the economy begins to expand.

It is this eventuality that has transpired for some of the UK's biggest companies, according to the latest survey by Capita Asset Service and Financial Director.

A total of 81 directors from the financial sector were quizzed as part of the study and the results concluded that 57 per cent had seen their cash pile increase during 2013. Even more striking was the fact that the average increase was found to be more than a quarter.

Capita Asset Services commercial director Justin Damer explained that those who have been frugal, and in some cases lucky, during the financial crisis are finally starting to reap the benefits.

He said: "Firms took drastic action to build cash reserves to insulate themselves enough to survive the recession and are now taking advantage of rising sales and profits to strengthen balance sheets further and pay down debt."

Mr Damer did go on to discuss the other side of the coin though, arguing that now the economy has begun to turn the corner, it is important firms do not become overly cautious, as holding back on investment could stall an upswing.

Key to going on to bigger and better things could also be attracting outside investment and that is something that is unlikely to happen without showing a certain amount of ambition.