Working Capital Study 25/26

We live in an era defined by unreliability but also charged with possibility.

The possibilities centre on the new domains of growth being opened up as innovation, industry reconfiguration and business model reinvention gather pace. Our ‘value in motion’ analysis reveals that $7.1 trillion in revenues is up for grabs.

With this comes a whole new set of challenges. To drive reinvention and capitalise on the growth opportunities, your business needs to steer through a world in which temporary uncertainty is giving way to sustained unreliability. The fragility and volatility of today’s operating environment cuts across everything from economic policies and geopolitical instability to supply chains, investment flows and consumer demand. As a result, ‘wait and see’ or ‘just in case’ approaches are no longer viable strategies.

What’s already clear is that a return to cheap money is unlikely any time soon. Long-term borrowing costs are already raising the cost of operational transformation and intensifying the pressure on working capital. Liquidity, so often the shock absorber in uncertain times, is at risk.

Projected UK, US and euro area policy rates

^{Source: Bank of England Monetary Policy Report - August 2025 
Note: All data as of 29 July 2025. The May 2025 curves are estimates based on the 15 UK working days to 29 April 2025. The August 2025 curves are estimates using the 15 UK working days to 29 July 2025. The Federal funds rate is the upper bound of the announced target range. The market-implied path for US policy rates is the expected effective Federal funds rate. The ECB deposit rate is based on the date from which changes in policy rates are effective. The final data points are forward rates for September 2028.}

Fortifying resilience

Waiting for stability to return is futile. Survival and success in an unreliable world demand a new level of resilience in which the insight, agility and discipline of effective working capital management (WCM) are essential.

Cash is king, not only in enabling your business to withstand shocks and ride out unreliability but also to seize emerging opportunities and accelerate reinvention and growth.

In turn, effective WCM is the best way to generate cash without having to rely on expensive sources of external funding or an operating environment that’s increasingly difficult to predict or control.

The dividend is the further €1.84 trillion of excess working capital globally that could be freed up for investment.

Comparing pre- and post-pandemic performance

Drawing on our analysis of working capital trends in more than 17,000 listed companies worldwide, this report looks at how to unlock the WCM dividend so you can strengthen resilience and accelerate reinvention.

Our analysis takes a long-term ten-year view, enabling us to compare WCM performance from before the COVID-19 pandemic with the more volatile years during and since.

Cash is there to be seized

As our analysis underlines, there is still a huge amount of cash to be seized through more effective WCM.

Days payable outstanding versus asset days over time

^{Source: PwC working capital analysis of over 17,000 companies worldwide
Disclaimer: The data presented is mapped differently from regional classifications and may not reflect the way individual PwC member firms are structured or operate.}

Net working capital (NWC) days – the key gauge of the level of capital required to run the day-to-day business – spiked during the pandemic amid uncertainty and supply chain disruption. It has since returned to more normal levels, but this headline stability hides a far shakier reality. Both days inventory outstanding (DIO), and days sales outstanding (DSO) are returning towards their pandemic-era highs, highlighting the return of a period of unreliability. Three forces are at play: divergent fortunes at sector and regional level, the outsized influence of large corporates and the widespread stretching of supplier payment terms.

At a regional level, the cracks widen. North America has seen an 8.1% reduction in NWC days since 2015, and Asia a marginal drop – but in both cases, days payable outstanding (DPO) has been pushed out by more than 14%. The rise in DPO is masking the impact of worsening receivables and bloated inventory. In the EU, NWC days has climbed 9.5% to a ten-year high, driven by a 19.3% surge in DIO. The UK has seen the most dramatic increase: NWC days has jumped by almost 50% since 2015, fuelled by a sharp rise in DIO in 2019-20 and, more recently, a fall in DPO.

The picture for smaller firms is starker still. NWC days has deteriorated by 13.5% for small businesses, and 19.8% for mid-size firms, since 2015. Meanwhile, large companies have kept their numbers in check by leaning heavily on suppliers and pushing DPO higher to hoard cash, offsetting the deterioration in DSO and DIO.

Looking at NWC through a sector lens reveals another mixed picture of WCM performance. NWC days for the most cash-intensive sectors (those above the NWC days average) has remained largely unchanged (from 68.3 days in 2015 to 69.2 days in 2024). Again, extended DPO has helped to counteract the increases in DSO, which has risen by 8.0% since 2015, and DIO, which has risen by 4.3% in the same period. However, when homing in on Western markets, there is a 13.6% (9.0 day) rise in DIO.

The high levels of DIO underline the challenges facing many businesses in this unreliable world and the pressing need for ‘old world’ economies to adapt. In a time when shocks are no longer rare but routine, weak working capital discipline can leave safety nets full of holes, failing when they’re needed most.

Why extending creditor days can’t prop up cash forever

Across markets, DPO has drifted back toward pre-pandemic levels, but the longer view tells a different story: DPO is up 11.5% since 2015. For years, stretching supplier terms has been the easy way to bolster working capital. But it’s a short-term fix that is not sustainable and carries long-term risks, straining supplier relationships. The regulatory tide is also turning, with increasing focus on regulation in the EU and UK, which may constrain firms’ ability to stretch payment cycles, placing downside pressure on DPO.

The message is clear: extending creditor days is not a sustainable solution to managing working capital performance. To offset the inevitable drag of shorter DPO, companies will need to focus on the fundamentals – tightening up receivables and inventory performance.

Average DPO in the UK and EU

^{Source: PwC working capital analysis of over 17,000 companies worldwide}

‘Just because’ stocking is a false economy

Inventory has become the silent absorber of uncertainty. Companies have built up stocks as a hedge against supply chain disruption, but at the cost of liquidity and efficiency.

Supply chains tend to be less agile to react to external shocks, especially where long lead times and physical production yields are key to driving asset utilisation and profit. During the recent period of uncertainty, we have seen a shift from ‘just in time’, to ‘just in case’ to ‘just because’ stocking – tying up cash and increasing waste, as well as creating unintended inefficiencies.

The temptation to stockpile in response to tariff or geopolitical uncertainty illustrates the risk. While it may feel prudent, this strategy absorbs capital, raises storage costs and heightens the risk of obsolescence. The supposed stability of extra inventory is unreliable – it can disappear quickly into lost value.

The data underlines the point. Having spiked during the pandemic, DIO has never returned to previous levels. Medium-sized companies are especially exposed, with an increase of 24.2% (15.0 days), compared to 5.5% (2.9 days) among large companies and 11.5% (8.5 days) for smaller enterprises.

At a sector level, increases in DIO have mainly been concentrated in the most cash-intensive industries, particularly for Western economies where DIO has risen 13.6% (9.0 days). This has pushed DIO for cash-intensive sectors in these regions to a ten-year high, contributing to an estimated €300 billion of excess working capital.

In general, the EU remains an outlier, with an average DIO of 90.2 days in 2024 for the most cash-intensive sectors, compared with 68.6 in North America and 62.8 in the UK. Despite pockets of improvement, the broader picture across Western markets is one of unreliable inventory strategies: stockpiles remain elevated, cash is trapped and resilience is weaker than it looks.

High DIO levels hamper cash and operational efficiency

^{Source: PwC working capital analysis of over 17,000 companies worldwide, filtered for EU, UK and NA}

The way forward

In unreliable times, liquidity is the ultimate safeguard – while effective WCM can be strategically transformational by putting you back in control. But there’s no single masterstroke to unlock the full potential. The way forward demands a holistic, proactive, and embedded approach that treats liquidity as a strategic resource and WCM as the discipline that protects and grows it — building the resilience to withstand shocks and the capacity to reinvest in reinvention.

So how can your business move from unreliability to resilience and seize your share of the €1.84 trillion dividend? Five priorities stand out: