The amount of money that British businesses have tied up in excess working capital rose by 7% to £535bn between the spring and the autumn of 2017, according to new research.

The Lloyds Bank Working Capital Index measures the pressure that businesses are under to either increase working capital or to increase liquidity. Sustained economic growth and the fall in the sterling exchange rate have put record pressure on UK businesses to increase the amount of money tied up in working capital, leaving them at risk if growth were to weaken in the months ahead, the report says. Businesses could struggle to free up cash either to grow or to weather turbulent financial conditions.

One in four businesses report that their customers have been taking longer to pay over the last 12 months, at the same time that there has been pressure to build up inventories. But a third of businesses are concerned about economic uncertainty or a decline in sales over the coming 12 months.

“Increasing pressure for British businesses to hold more working capital has to date largely been driven by economic growth fuelled by the fall in sterling,” said Adrian Walker, managing director and head of global transaction banking at Lloyds Bank. “But if there were any economic obstacles on the horizon this could be a double-edged sword. By locking up cash in this way, it stops investment in other more productive areas of the business, whether that be investing in new people, creating new products or targeting new markets.”