Will Covid-19 be the inflation game-changer in 2021? We The Covid-19 crisis has pushed up cash concentration among European non-financial corporates: overall, NFCs now hold cash reserves equivalent to three months of turnover, more than half a month higher than pre-crisis averages, and it is the richest sectors and companies that have become even richer. After increasing considerably in 2020 in most European countries , non-financial corporates’ (NFC) cash has plateaued at high levels over the past few months. In France, total NFC deposits bring a cash-flow relief of more than four months of turnover, close to one month more than pre-crisis levels, while in the UK they are equivalent to close to 3.2 months, around 18 days above pre-crisis levels. Given the continued light lockdowns across major European countries over the past few months, cash positions have remained quite sticky, raising upside risks for defensive and offensive investments in 2021. 

Looking at the evolution of total cash positions in relative terms within countries, sectors such as industrials (mainly in Italy, Spain and to a certain extent the UK) and consumer goods (mainly in France and Germany) account for most of the cash hoarding of listed companies. Yet, the increase in cash hoarding has also proved to be uneven within each sector to the benefit of the already richest companies. In the main European countries, the top 10 cash surges in amount of cash were systematically higher than the average increase in relative terms, implying a higher concentration of cash. Looking at the financials available as of early April , the companies reporting the 10 largest increases in cash in 2020 posted a +56% increase (compared to +45% for the EU average) and were hoarding almost half of the total cash of listed firms. In view of this, governments have already started to implement progressive exit strategies from widespread fiscal support measures.