Report reveals firms’ £69bn excess capital

BUSINESSES are sitting on £69bn of excess working capital for financial year 2012, according to analysis by Deloitte.

This is equivalent to a free cash injection worth 5 per cent of the total income of the firms analysed.

Typically, excess working capital is tied up with inefficient financial and operational processes.

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Paul Trickett, corporate finance partner in Yorkshire, said: “The effective management of working capital can easily be overlooked, especially when the focus is on generating new growth.

“Yet this is a good time to focus on managing basic processes, as it could free up cash for investment.

“Last year’s increase is due in part to a shortening of supplier payment periods, as well as being a byproduct of growth.”

Deloitte’s report looked at the performance of UK listed companies with turnover greater than £60m.

The report found unlocking this excess working capital would be the cheapest source of finance to protect or grow shareholder value, rather than a bank loan or equity bonds.

Companies in the UK are becoming less efficient in the cash conversion cycle, said Deloitte.