Companies stack cash reserves, lag on reinvestment

Non-financial companies increased their reserves in the corona years 2020 and 2021. This was possible because profits rose significantly in 2021. But many companies also put less money into investments and repaid less on loans, in order to have a larger buffer. This is reported by the Central Bureau of Statistics (CBS). Due to the corona measures, the total gross profit of companies in 2020 fell by more than 10 percent compared to a year earlier. This also meant that companies lost less on taxes. However, due to the corona pandemic, companies also began to save, to create a pot for unforeseen events. They did this, for example, by reducing investment and advertising costs and paying less extra on loans. For example, reserves increased by just under 30 billion euros that year. In 2021, profits rose by more than a fifth compared to 2020. Of those profits, a larger proportion went to the reserve than in previous years. In that year, 64.6 billion euros were raised. The investment ratio, the ratio between investments and the added value of non-financial companies, has fallen in the corona period. In 2019, 18.5 percent of the added value was invested. A year later, it [...]

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