Small businesses plan to save rather than invest

8 July 2008

Uncertain economic conditions mean that increasing numbers of small firms are aiming to save money rather than plough funds back into their businesses.

A survey of 1,000 SMEs by Bank of Scotland Business Banking found that three-quarters of respondents are planning to defer decisions about investment, preferring to save surplus cash.

In the coming year, 38 per cent of businesses polled reported that they intend to set aside funds for future investment. Almost the same proportion (37 per cent) said that they aim to create savings in order to benefit from the interest. Some 26 per cent want to save money against economic rainy days.

Peter Wood, Bank of Scotland Business Banking’s head of strategy and products, said: “In a more cautious economic climate, where saving is prioritised over investment, it’s vital that small businesses find the best home for their surplus cash.

“Making the right investment and savings decisions can make a huge difference to the bottom line of any business, particularly small businesses where the line between profit and loss can be marginal.”

But while saving money may be an aim for many businesses, large numbers believe that setting funds aside is going to be difficult.

Almost a third are still investing more in their firms than they are saving, while one in five are saving and spending in the same amounts. Just one in ten are hitting their target of putting more funds aside than they are spending.