In total, EMEA’s 1,200 listed companies have increased cash reserves by almost €250bn (£200bn) since 2007, with €47bn added in the last year.

According to Deloitte figures, more than 75% of the reserves are held by just 17% of listed EMEA companies. This mirrors a global trend, where 80% of the $3.53tn kept in reserve is held by just a third of businesses.

The findings show that listed companies have chosen to preserve cash in recent years, rather than choosing to invest it.

A trend of radical changes has been noticed in EMEA business behaviour since the financial crisis, with European business competitiveness seemingly under threat. Indeed, since 2010, a net balance of 41 European countries has exited the Global Fortune 500 – the sharpest fall on record.

Chris Gentle, head of EMEA research at Deloitte, said, “Our research found that the leaders of many companies expect double digit revenue growth in the years to come, yet continue to focus much of their efforts on the eurozone, a region identified by most as having relatively low growth prospects.

“With growth in EMEA subdued, we believe companies will need to invest significantly, both organically and inorganically, to achieve their ambitions.”

Joining Gentle was Iain Macmillan, head of mergers and acquisitions (MA) at Deloitte UK, who explained that globally, European MA activity was lagging behind other regions.

Macmillan said that if European countries wanted to see double-digit growth, they needed to ramp up MA actions.

Macmillan said, “Although we have seen an upturn in the level of merger and acquisition activity globally, in Europe MA activity continues to lag behind.

“If European companies want to achieve double digit growth, then they need to consider MA activities as part of their growth strategy.

“Our study on cash shows companies that are taking a more bullish stance on growth and spending their cash on MA and capital expenditure are reaping the benefits through enhanced share price performance.”

Of the 1,200 businesses that responded to the survey, 59% said they would be looking to invest some of their reserves; 31% said they wanted to improve their balance sheet.

Gentle said, “Our research suggests that the majority of large businesses across EMEA have reached a pivot point in their attitude to investing, with the impetus to use their cash reserves for growth increasing all the time.

“However, confidence remains brittle and it is likely that such activity will return gradually.

“There is a paradox in Europe between the firepower its companies have to invest and the ongoing requirement of the European Central Bank (ECB) to announce a new stimulus package as happened earlier this month.”

Oliver Griffin

 

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