Increased working capital reserves could put East of England firms at risk if growth slows, Lloyds warns
- Credit: Eastern Daily Press � 2008
East of England businesses could be left at risk if sustained economic growth slackens, after it led to pressure to increase the amount of money tied up in working capital.
A new report from Lloyds' commercial banking division shows firms across the region have around £27.9bn tied up in excess working capital to fund day-to-day running costs – up 13% since May.
Having cash locked up in this way means firms could struggle to free up reserves either to grow or to weather turbulent financial conditions, Lloyds said.
Karl Leitelmayer, area director for Lloyds Bank Global Transaction Banking in the East of England, said it is the only region in the country to see its Working Capital Index reading fall in the past six months.
'While this suggests businesses are recognising potential challenges and choosing to manage their working capital more closely, firms are still facing pressure to increase working capital.'
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Sustained growth in the past year – particularly in manufacturing and in the services sector – has increased the amount of cash tied up in the day-to-day running of UK businesses, with the impacts from the weak pound and rising input costs being fully realised.
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