UK companies hoarding cash ahead of Brexit, new data shows

Research also shows that manufacturers have been building up stocks ahead of the UK's departure from the EU

Stockpiling has spread to cash, as UK companies build up reserves ahead of Brexit, according to new figures from UK Finance.

Deposits held by UK non-financial companies grew by 3.5 per cent in the year to December 2018, with the wholesale and retail, transport, electricity, and gas and water sectors all recording higher annual growth.

Stephen Pegge, managing director, commercial finance at UK Finance, said the figures suggested “firms are preparing for uncertain trading conditions by building up their cash reserves”.

The data also showed that lending to manufacturing grew by 8.4 per cent in the year to December, compared with a 0.3 per cent drop among UK businesses overall.

“This may in part be driven by manufacturing businesses stockbuilding in the face of ongoing economic uncertainty,” Mr Pegge said.

The figures follow research from Lloyds Bank which showed that UK firms ramped up stockpiling in the final quarter of last year.

The bank said the increase in stockpiling efforts was caused by the threat of shortages and disruption posed by Brexit.

UK Finance also released data on household lending and spending in 2018.

Credit card spending rose to £11bn in December, up 8.8 per cent on the same month in 2017.

Eric Leenders, the trade group’s managing director for personal finance, said this rise in spending was “largely offset by increased cardholder repayments, with almost half of cards not bearing any interest at all”.

“This reflects the growing trend of consumers using credit cards as a preferred payment method rather than as a means of borrowing, in order to take advantage of additional protections and value-added benefits,” he added.

Meanwhile, while mortgage lending rose 4.7 per cent in December to £21.1bn, the number of mortgages approved that month was down 2.4 per cent compared with one year earlier.

“We know from the experience before the 2016 referendum, however, that political uncertainty can have a big impact on lending,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

He also warned that “the recovery in mortgage approvals once Brexit uncertainty has faded likely will be lacklustre”.