Working Capital As Strategy: What UK CFOs Must Rebuild Now

UK CFOs must treat working capital as a source of strategic yield in 2026, not an operational buffer — because tax relief on capital spending just got more expensive. From May 2026, HMRC’s Writing-Down Allowance for main pool assets was cut to 14%, down from 18%, slowing the recovery of capital expenditure costs and pushing CFOs to fund growth from the balance sheet rather than the tax system.

That shift, combined with a Bank of England Monetary Policy Committee still sensitive to inflation and geopolitical data, has moved liquidity management from a treasury function to a board-level priority.

Why is working capital now a CFO strategic priority?

According to PYMNTS.com’s 2026 treasury coverage, CFOs are increasingly optimising payment timing and liquidity to generate returns on idle cash, using virtual cards, dynamic discounting and supply chain finance to extend buyer liquidity while giving suppliers faster access to funds. Payments themselves are becoming financial infrastructure rather than a back-office process.

The tax backdrop reinforces this. Under HMRC’s reduced 14% Writing-Down Allowance, capital expenditure recovers more slowly through the tax system, so CFOs who previously relied on relief to smooth investment cycles must now find that value through tighter working capital and cash conversion instead.

• Executive Action: Model the cash impact of the reduced Writing-Down Allowance against every planned capital project.
• Reassess payment terms with key suppliers and customers as a treasury lever, not just a procurement one.
• Brief the board on the shift from tax-funded to balance-sheet-funded capital investment.

How should CFOs use AI in cash flow forecasting?

Forecasting accuracy is now a measurable AI dividend. According to ChatFin’s 2026 treasury research, among lower-performing firms that adopted AI for working capital management, cash flow unpredictability dropped from 68% to 17% — a material reduction in the forecasting error that drives unnecessary cash buffers and missed investment windows. CFOs who have not yet audited their forecasting stack are sitting on an avoidable cost of capital.

• Executive Action: Pilot AI-assisted cash flow forecasting against 12 months of historical variance data before scaling.
• Set a target forecasting error rate and report it to the board quarterly.
• Require the technology team to document data governance for any AI forecasting tool, given shared exposure with AI risk reporting.

What role should stablecoins and digital assets play in treasury?

Digital assets are moving from experimentation to infrastructure debate. Industry research cited by Ripple’s 2026 corporate treasury analysis found that 74% of finance leaders believe stablecoins can boost cash-flow efficiency and unlock trapped working capital, yet most still lack the systems to act on that conviction. CFOs should treat this as a capability gap to close deliberately, not a trend to chase, particularly with the FCA’s cryptoasset regime authorisation gateway opening in September 2026.

• Executive Action: Commission a feasibility review of stablecoin settlement for cross-border trade flows.
• Assess treasury systems for readiness ahead of the FCA’s cryptoasset authorisation gateway.
• Use INFORMD’s capital approval assessment to structure the business case before committing spend.

How should CFOs brief the board on liquidity risk?

Liquidity management has become a boardroom topic for three converging reasons: sterling rate uncertainty tied to Bank of England policy, tighter capital allowances raising the cost of self-funded investment, and rising expectations that finance chiefs demonstrate — not merely assert — cash resilience. The board’s role is to approve the capital allocation framework; the CFO’s task is to arm them with a clear liquidity position and stress-tested scenarios.

• Executive Action: Present a rolling 13-week cash flow forecast alongside the annual budget at every board cycle.
• Stress-test liquidity against a sterling rate shock and a working capital freeze scenario.
• Benchmark treasury maturity using INFORMD’s executive self-assessment tools.

CFOs who get ahead of this shift will fund growth on their own terms. Those who don’t will find capital allocation decisions made for them by rate movements and tax changes outside their control. For a deeper walkthrough of the frameworks referenced here, contact INFORMD.

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