Research reveals corporate investment is heading back to pre-crisis levels
New Investec research shows nearly half (46%) of corporates and large SMEs expect business investment to return to pre-crisis levels by the end of 2022 as business gets back to normal. Around 10% expect to increase investment to pre-crisis levels this year.
Its study among 100 senior executives at corporates with total cash deposits of more than £6.17bn and average reserves of around £62.3m found just 16% expect to take three years or more for the investment recovery with 35% saying they will be back at pre-crisis levels by 2023.
The research for Investec, which provides bespoke deposit accounts for corporates with between £5m and £150m on deposit, found cash reserves will be a major source for increased investment.
More than half (52%) of companies questioned expect cash reserves to fall over the next six months with 11% predicting a dramatic drop in cash reserves driven mainly by the return to business as usual.
Of those companies who expect their cash reserves to fall, 81% say it will be because they will use it to fund significant growth plans, while two-thirds (67%) say they need to access cash reserves to pay for growth and increased costs as they return to normal. Around 17% say their cash reserves will fall because they must repay government loans accepted during the crisis.
FJ Eigelaar, head of client group funding at Investec, said: “Many companies have built up significant cash reserves during the crisis and as the economy returns to normal to an extent will start to run down cash balances.
“More than half of firms expect cash deposits to fall and most expect investment in operations and their businesses to return to pre-crisis levels over the next year or two.
“That underlines the need for flexibility and planning in handling cash reserves and treasury departments will need to balance how they do this this after 18 months which have seen many piling up cash.”
Investec’s study found 22% of corporates and large SMEs still expect cash reserves to increase over the next six months with 82% saying the rise in cash deposits is being driven by strong growth.
Around 68% of those expecting increased cash reserves say they want to ensure reserves are strong in case of further crises in the future while 59% say they are seeing the benefits of improvements to operations instituted during the crisis. Around 26% of firms say there will be no change to cash reserves over the next six months.
Investec offers a wide range of bespoke deposit accounts for corporates and large SMEs for minimum deposit sizes of £5m. Products include notice accounts, instant access accounts and its Access 50 account offering higher rates than notice accounts and also the flexibility of fee-free instant access up to 50% of the deposited amount.