Many SMEs say that they are keeping the cash stored to protect themselves from future problems rather than investing in the day-to-day running of the business, the research finds.
Over sixty per cent of SMEs are holding on to an average of £190,000 in the bank to act as a buffer incase of future financial difficulty, rather than investing in growth.
Peter Ewen, Managing Director at Venture Finance, said: “In the aftermath of economic crisis, business owners appear to be building up their war chests and waiting for clearer economic skies. But this could become a vicious cycle, sending everyone back into the doldrums.
“If SMEs can shake off this cautious mood and grasp the increasing growth opportunities available, it could be a great boost for them and for the UK economy.”
Despite signs of recovery, SMEs have been cowed by the recession and remain stuck in a cautious mindset, not considering growth.
Almost half of those questioned feel that the economy is too uncertain to invest in growth with many also putting off growth and waiting for a change in the economic picture.
As a result of reduced confidence, almost a third of UK SMEs have no plans to grow and over a quarter are not planning to invest in growth within the next 12 months.
Peter Ewen comments: “Many SMEs appear to be sitting back and waiting for a brighter economic outlook which might not come if they don’t take decisive action.
“The credit crisis has been a big knock to the British entrepreneurial spirit. A shift out of the recession mindset and an investment gear change could be just what’s needed for SMEs to steal a march on their competition and look towards growth.”
“SMEs need to put their heads above the parapet and start exploring their business and financial options. Now could be the time to put internal, and external, resources to good use to grow their way out of hard times.”