By Mark L Thomas
Downloading PDF. Please wait... Issue 393

Hoarding cash

This article is over 8 years, 1 months old
Issue 393

Big corporations are cash rich. The 2,000 biggest companies by capital expenditure are sitting on a cash mountain of gross £2.6 trillion.

But they aren’t spending it on new rounds of capital investment despite all the talk of an economic recovery.

Standard & Poor estimate that such spending is likely to fall by 0.5 percent this year in real terms. This follows a 1 percent decline in 2013.

And in “emerging markets” such as China, Brazil, Russia and India, the rate of decline in capital investment is even faster, falling by 4 percent in 2013 with a similar decline likely this year.

One problem is that the largest 2,000 companies are also highly indebted. Globally, net corporate debt rose from £5.9 trillion in 2012 to £6.5 trillion in 2013.

“There was a lot of hope that a clear improvement in the economic cycle might trigger the second stage when companies feel more comfortable and start spending their cash,” Gareth Williams, corporate economist at Standard & Poor’s in London, told the Financial Times.

“For a variety of reasons this isn’t going to happen and it raises questions about the robustness of the recovery this year.”

Sign up for our daily email update ‘Breakfast in Red’

Latest News

Make a donation to Socialist Worker

Help fund the resistance
One-off