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CFOs more optimistic about UK business environment

Oct 18
Tags: Deloitte
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CFOs more optimistic about UK business environment

Concerns over business conditions in the UK have eased over the past few months, with chief financial officers (CFOs) adopting a more optimistic attitude towards subjects such as future prospects for their companies, research has shown.

In its Q3 2017 CFO Survey, Deloitte questioned more than 100 finance leaders from large private companies with a combined market capitalisation of £416 billion.

Confidence on the rise

In the third quarter of this year, more than one in four respondents (27 per cent) said they had become more optimistic about the prospects for their business over the previous three months. That compares to less than a fifth (18 per cent) who had become more positive in Q2.

Furthermore, the proportion of CFOs who had become less optimistic dropped from 42 per cent to 27 per cent.

Around a third (34 per cent) felt that their company was facing a high level of uncertainty. That marks an improvement from 43 per cent in the last quarter and is almost half the level recorded immediately after the EU membership referendum in June 2016.

The research also highlighted a slight increase in risk appetite, with 24 per cent of CFOs saying now is a good time to take risk onto their balance sheet, up from 22 per cent in Q2. The latest figure is three times that recorded in the aftermath of the referendum.

Other key findings showed that reducing costs is the main focus for CFOs at the moment, with 41 per cent citing it as a priority. Introducing new products and services (39 per cent) and increasing cash flow (35 per cent) are also big considerations.

Ian Stewart, chief economist at Deloitte, said: "Optimism among CFOs has rebounded after a slump following the snap general election and perceptions of uncertainty have eased to almost half the level seen immediately after the referendum. Despite Brexit uncertainties a broadening global recovery has helped lift sentiment among CFOs."

The Brexit question

Britain's impending exit from the European Union still tops the list of risks facing businesses in the UK, even though concerns around Brexit appear to be moderating.

The majority (60 per cent) of CFOs told Deloitte that the UK's departure from the EU will cause the business environment to deteriorate, but that proportion is down from 72 per cent in the second quarter of this year.

Similarly, the share of finance leaders seeing a better long-term business environment remains relatively low (14 per cent), but is on an upward trend from Q2 (eight per cent).

The proportion of respondents predicting a slowdown in hiring as a result of Brexit dropped slightly from 38 per cent to 36 per cent.

David Sproul, senior partner and chief executive of Deloitte North West Europe, said: "It is critical that progress is achieved soon in the negotiations between the UK and the EU to provide more certainty to business and to deliver a real boost to corporate spirits and plans."

After Brexit, weak demand in the UK and the possibility of higher interest rates in the UK and US were cited as the biggest concerns for British businesses.

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Image: iStock/kovalchuk

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