SCOTTISH businesses are storing up potential difficulties by having too much tied up in excess working capital, a new survey has signalled.

While Scottish firms have started reducing working capital, contrasting a sharp rise seen among businesses across Britain as a whole, they still have at least £31.5 billion tied up in working capital.

And that means they could find themselves exposed if they are left holding too much stock if economic conditions worsen.

The claim is made by Bank of Scotland on the basis of its new six-monthly Working Capital Index.

It uses the bank’s Regional Purchasing Managers’ Index (PMI) to calculate the pressure businesses are under to increase or decrease working capital. A reading of more than 100 indicates pressure to devote more cash to working capital, while a sub-100 reading signals pressure to prioritise liquidity, under the index.

The reading for Scotland was measured at 99.5, down from a high of 104.8 in October.

The bank said the score suggests prudent Scottish firms have started to reduce their working capital to increase the amount of cash available in their business.

However they have the opportunity to release a further £31.5n, the bank said.

Colin Walls, managing director of global transaction banking at Bank of Scotland, said: “Working capital is the lifeblood of any business, and our research shows that Scottish businesses have huge amounts of money tied up in it.

“This cash mountain could be a good sign: businesses can afford to stock up and tie up increasing levels of cash in working capital when they are performing well and focussed on growing their business.

“But having those funds locked away at times of uncertainty, or if the economy falters, could spell danger.”