Cash is king for firms

NORTH West companies are increasingly tightening their belts and upping cash reserves as they continue to do battle with the credit crunch amid worsening economic conditions.

A report by the Institute of Chartered Accountants In England and Wales (ICAEW) found that 79% of companies in the region are planning to increase cash balances, and more than half intend paying down debts.

While all regions have been affected by the turbulence in global financial markets, businesses in the North West are among those worst-hit over the past year, with more than two-thirds reporting a negative effect.

Half of the firms surveyed in the region say the credit crunch has meant reducing planned staffing levels, compared to 37% nationally.

Meanwhile 10% of North West businesses – more than in any other region – predict they will downsize over the next two years, as against just 4% nationally.

ICAEW North West director Mark Hale said: “Nobody can yet predict what the impact of the current turbulence in the financial markets will be on the broader economy.

“North West businesses know that the climate isn’t going to improve in the short term. Despite this they are doing exactly the right thing to weather the storm by building up cash and reducing debt.”