Press releases

UK businesses sitting on £69 billion of unproductive working capital for 2012, up 8% on previous year

18 December 2013

  • Excess working capital in UK plcs is on the increase from £64 billion in 2011 and £60 billion in 2010

UK companies are sitting on £69 billion of excess working capital for financial year 2012, according to analysis by Deloitte. This is equivalent to a free cash injection worth 5% of the total income of the firms analysed. Typically, excess working capital is tied up with inefficient financial and operational processes.

Andrew Harris, partner in Deloitte’s finance transformation group, 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, ‘Working Capital: UK plc’s unproductive £69 billion’, looked at the performance of UK listed companies with turnover greater than £60 million. 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*, with small businesses (annual turnover of less than £300m) deteriorating at the fastest rate. The report highlights that 68% of cash is held by the top 11% of UK companies, a group able to negotiate terms in their favour with smaller suppliers.

Harris concluded: “There are a range of process efficiencies, financial instruments or ways of outsourcing available to address this problem, without damaging relationships with suppliers. By using demand forecasting and effective planning techniques, it is possible for cash to be freed to use elsewhere. Streamlining excess working capital will enable UK businesses to take advantage of the economic recovery.”

Meanwhile the Eurozone crisis has caused European businesses to reduce their working capital excess more effectively than those in North America. While Europe reduced its days inventory (inventory into sales) by an average of 3% on last year, North America’s increased by the same amount.

*Cash conversion cycle refers to the number of days that it takes from disbursing cash to collecting cash


Notes to editors

The Deloitte working capital study provides a view of working capital performance of UK listed companies with turnover greater than £60m.

The analysis is based on data extracted from Capital IQ for the past five years (latest available accounts plus preceding four years).

About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities.

Please see for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

Member of Deloitte Touche Tohmatsu Limited.

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