“£110 billion Working Capital ‘Puts Survival Of Companies At Risk’”
In the December 18, 2009 issue of The Daily Telegraph, Booz & Company Partner John Potter (Europe) said British companies that are able to free up working capital, often tied locked into high levels of inventory, could provide a wave of cash for companies to invest in research and development to boost their competitiveness. “When capital is scarce, making better use of working capital is not merely a matter of improved practice,” said Potter. “Companies risk their competitiveness, in fact their own survival, by neglecting the cash available at home.” Potter was speaking about a Booz & Company survey, which found British companies have £110 billion tied up in working capital on their balance sheets, seriously affecting their competitive edge against overseas rivals. The study of 202 publicly-traded companies with combined annual revenues of more than £1.2 trillion, looked at three areas of working capital—receivables, payables and inventory—across 31 sectors. The research found firms were sitting on a sum equivalent to 10 percent of the total annual revenues of every business in the FTSE 100 and more than five times the UK Government’s economic stimulus package.