Business owners are reportedly increasing the amount of cash they are holding in their current accounts.
This comes amid growing concerns that the UK is set to be hit by another credit crunch on October 31st.
Why Are Businesses Deciding To Store Cash In Current Accounts?
The Hampshire Trust Bank have revealed that due to fear surrounding a no-deal Brexit, business owners are storing their cash away into current accounts.
But why are business owners doing this?
Well, the report shows that most of the business owners who are opting for this strategy are the ones who will need to pay back loans, should a recession hit the UK.
Other business owners are putting the cash to one side, in case any once in a lifetime investment opportunities appear, should the UK leave the EU.
How Much Are Businesses Depositing Into Current Accounts?
The report reveals that businesses did the exact same thing as we approached the previous March deadline.
The average amount being put aside is a whopping 78% increase, from previous deposits.
The average business current account two years ago held £408,000… whereas now the average sits at £726,000.
Seeing as these deposits have been happening across the past two years, the evidence strongly suggests that it is Brexit related.
The data is drawn from 500 companies who turnover between £500,000 and £100m.
Business owners have also slightly decreased in their use of overdrafts.
Should You Stockpile Cash In A Current Account?
This technique of stockpiling your cash in a current account looks set to be helpful, particularly if the UK falls into a recession and you have loans to pay back.
Decisions like this could be a make or break decision for businesses in these situations.
However, by stockpiling an increased percentage of your income, particularly this amount, you will need to make big sacrifices in the life of your business. This might look like:
- Holding back on hiring staff.
- Deciding not to buy new equipment.
- Cutting down on business expenses.
Of course, this is all until the Brexit position is certain. If that happens that things will probably change…
Should the situation surrounding Brexit become clear, and the UK avoid a recession, there would be a great amount of freedom for businesses who have saved up this kind of money to spend and invest.
This could signal a real economic upturn!
Every business is different, and therefore, each business should prepare differently for whatever the Brexit decision.
However, drawing inspiration from other business owners who might be in a similar situation to you will probably be the most effective way of making the most of this situation.
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