The firm’s latest quarterly CFO survey found corporate uncertainty is at a two-year low, while the Brexit transition deal announced mid-March has boosted business optimism.

Overall, 20% of CFOs say they are more optimistic about the prospects for their company than they were three months ago, up from 18% in Q4 2017. 

A quarter (27%) of those who completed the survey after the Brexit transition deal was announced said that they were more optimistic about their financial prospects, compared to 18% responding beforehand. The deal had a similar effect on risk appetite, with 12% of those responding before saying it was a good time to take on risk, compared to 23% afterwards.

CFOs’ perceptions of uncertainty have fallen, with 31% saying there is a high or very high level of financial and economic uncertainty facing their business, down from 38% in Q4. This is the lowest since the build up to the EU referendum (29% in Q1 2016).

CFOs are becoming less pessimistic about the effects of Brexit on their spending and hiring decisions. A quarter (25%) now say they expect their capital expenditure to shrink as a result of Brexit, down from 39% in Q4, while 30% say they expect hiring to slow, down from 41% on the quarter.

For the first time since the EU referendum, Brexit is not the biggest risk CFOs say their businesses face. Rating risks on a scale of 0 to 100, CFOs assign a rating of 57 to weak demand in the UK (down from 59 in Q4) with the effects of Brexit scored at 56 (down from 62 in Q4). 

Brexit is followed by the prospect of higher interest rates and tighter monetary conditions in the UK and US (51), poor UK productivity (48) and policy uncertainty in the US and the risk of greater protectionism (47). Weakness and volatility in emerging markets (43) and weakness and deflation in the euro area (37) were the lowest-ranked risks.

Cost control remains the main focus for CFOs over the coming 12 months, with 42% citing it as a strong priority, down from 51% in Q4. Introducing new products and services or expanding into new markets, ranks as the second highest priority, reported by 40%.

David Sproul, senior partner and chief executive of Deloitte north west Europe, said: ‘The effect of the transition announcement on this quarter’s survey results underscores the sensitivity of sentiment to developments in the Brexit negotiations.

‘The moment of truth on Brexit is approaching. The UK government hopes to strike a deal with the EU and have it endorsed by Parliament this year. Whether it succeeds in doing so seems likely to be a major driver of business confidence through the rest of this year.’

In total 106 CFOs of FTSE 350 and other large private companies participated in the Q1 2018 poll. The combined market capitalisation of the 78 UK-listed companies who participated is £427bn, approximately 17% of the UK quoted equity market.

Report by Pat Sweet