Finance Chiefs Say Tax Reform Won’t Lead To Increased Spend

Despite tax reform, U.S. corporates don’t expect to increase spending, according to a new report from the Association for Financial Professionals (AFP).

The AFP 2018 Liquidity Survey, published Tuesday (July 10), found 40 percent of the 640 corporate treasury and finance executives surveyed do not expect spending to change as a result of tax reform. For the businesses that do expect to increase spend, 26 percent said they plan to pay down debt, while 24 percent plan to pull foreign cash back into the U.S., or have already done so.

“While treasury and finance professionals welcomed corporate tax reform, they continue to be strategic and cautious, and are choosing to wait for the right opportunity to spend their tax cut savings,” said AFP President and Chief Executive Officer Jim Kaitz in a statement.

In another statement, State Street Global Advisors‘ Senior Managing Director and Global Head of Cash Business Yeng Felipe Butler said businesses are using their strong cash balances as a buffer against rising concerns for U.S. economic growth.

“We’re seeing a shift in investment professionals using cash management as part of a broader corporate strategy, from historically being an operational after-thought,” Butler said.

Fifty-nine percent of survey respondents do not expect any changes in short-term investments for their firms, the report found. Only about one-tenth said they anticipate a change in their mix of short-term investments. An average of 75 percent of short-term investment balances are allocated to investment vehicles like band deposits and money market funds, the AFP found.

The AFP’s report follows just weeks after it released separate data that came to similar conclusions. The Association published its Corporate Cash Indicators Report in May, and found that concerns over global trade disputes have financial professionals retaining cash reserves. Nearly half of survey respondents said they held larger cash and short-term investment balances by the end of Q1 2018, compared to Q4 2017.