The research reveals that a lack of available credit by banks is causing CFOs to re-evaluate their company’s balance sheets and how they manage profits. A quarter (26%) of those surveyed cited difficulty in securing finance and credit as the main reason for not returning profits to investors or re-investing in the business. Surprisingly, it is large UK companies that appear to be suffering most from the credit squeeze, with over a third (35%) citing difficulty securing finance and credit as the primary reason for keeping more cash in reserve.
However, 16% of CFOs admitted that they are stockpiling cash in a bid to facilitate the future expansion of their business. Mergers and acquisitions are still on the agenda for a number of CFOs, with 8% of all surveyed planning to use profits to expand this way, while 15% of CFOs from large organisations planning M&A activity with these revenues.
Ashley Whipman, director of Robert Half Management Resources (UK), commented: “It is not surprising to see that CFOs are reserving cash during this period of uncertainty. UK businesses are still finding it difficult to secure finance and credit to help support business growth, which is adding further pressure on the UK economy. Although it is encouraging to see that many CFOs plan to grow either organically or through acquisition.”
CFOs were asked, ‘Which of the following best explains your reason for keeping higher cash reserves?’ Their responses:
|
|
Total |
Scotland/ Northern England |
Midlands |
Southern England |
London |
|
Difficulty securing finance and credit so we are keeping more cash in reserve |
26% |
36% |
35% |
25% |
11% |
|
Concerns over economic outlook |
23% |
36% |
18% |
33% |
11% |
|
Increase in operational cash flow disruption therefore need to keep more cash in reserve |
21% |
7% |
18% |
33% |
26% |
|
Stockpiling cash for investment in the business to expand |
16% |
14% |
12% |
8% |
26% |
|
Stockpiling cash for acquisition |
8% |
7% |
6% |
16% |
Source: Robert Half International, September 2011
Amidst the backdrop of the global/Eurozone debt situation, concerns over the economic outlook was the second highest reason for amassing profits, with 23% of CFOs nervous about the continued financial difficulty. Those in the public sector are the most worried, with half (50%) citing the bleak economic outlook as the main reason for retaining cash.
Ashley Whipman, concludes: “Cash flow is clearly a concern for many CFOs and with four in 10 companies planning to increase investments in the next 12 months, it is essential that companies have a clear financial strategy to maximise returns during this era of uncertainty. Many companies without the requisite talent to manage strategic initiatives in-house are turning to senior-level finance professionals on an interim basis to provide financial guidance and leadership.”
