A survey* of 508 business leaders and senior decision-makers has revealed that over half have had to adjust their reinvestment strategies due to aspects such as inflation and energy costs.
The cyclical investment of funds into business is one of the major methods of influencing growth and increasing revenue. However, with the current global economic situation – has this been affected as a result?
Speaking on the survey, Philip Brennan, Founder and MD at BusinessComparison, said: “Our exploration into businesses’ reinvestment plans and whether they’ve been affected yielded some interesting insights. Specifically, it was shocking to learn that over half of business leaders surveyed revealed their plans had been altered as a result of global circumstances.
‘’It was also intriguing to see the regions investing the most, with the East of England investing almost half of their profits on average. Although the current situation poses a real problem for businesses, it was encouraging to see so many maintaining reinvestment plans.’’
Firstly, they wanted to find out if businesses were still investing cash back into their business. The survey revealed that 53% do annually and 19% invest depending on profits received.
The regions investing the most on a yearly basis were the North West (67%) and Greater London (66%), on the other hand, 17% from the East of England revealed they don’t reinvest despite making a profit.
Of those who do reinvest, 23% said that they invest 11%-20% of profits or excess funds. Additionally, one-fifth stated that they invest 21-30%. The national average investment was a total of 37% of profits.
Age data revealed 18 to 24-year-olds invested 41% of profits compared to 27% from those surveyed aged 55 and above.
Regionally, those in the East of England were the largest investors – investing 44% of profits back into business operations. The lowest was the South East region, with an average reinvestment of 28% of profits.
Now that we know investment has continued for 84% of businesses, what are these funds spent on? The top three responses were;
Purchasing new equipment or technology: 59%
Investing in advertising/marketing: 50%
Investing in staff training: 43%
54% of business leaders in Greater London revealed equipment and technology were the priority. Additionally, 47% of the East of England focused on putting steps in for self-sustainability – more than any other area.
With the increased financial pressure, have reinvestment plans been affected? The survey revealed that a whopping 57% of businesses have had their investment strategies impacted, including 55% who have continued investment at a reduced rate and 2% who have scrapped reinvesting altogether.
Lastly, the survey aimed to find out how businesses were securing funds to continue investment, the top three responses were:
Business loans: 35%
Secured funding from current stakeholders: 34%
Investing funds from the director: 33%
Overall, the global circumstances have had a detrimental effect on both businesses and their investment plans. The survey displays the effect the increased financial strain is having on these companies.
*Survey by BusinessComparison