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British small to medium-sized enterprises are taking a cautious approach to their finances in light of a possible recession, according to research from Bank of Scotland Business Banking.

Its survey of more than 1000 small firms found that 76 per cent of owner-managers are putting off business investment due to economic uncertainty, preferring instead to keep a buffer of cash.

Over the next 12 months, nearly four in 10, or 38 per cent, plan to put aside money for future investment in the business, while 37 per cent plan to put money in savings accounts to earn interest. A quarter will pay for insurance against hard times and a further worsening in economic conditions.

However, the research found three in 10 owner-managers are continuing to invest more into the business than save, and 36 per cent are neither saving nor investing but biding their time.