Optimism among chief financial officers (CFOs) has recovered from its post-election low and is close to levels seen at the end of last year, with Brexit viewed as less of a concern although the focus remains on defensive strategies, according to research by Deloitte
The firm’s Q3 2017 CFO survey polled 102 CFOs of FTSE 350 and other large private companies. The combined market capitalisation of the 75 listed companies who participated is £416bn, approximately 16% of the UK quoted equity market.
A quarter (27%) of respondents say they are more optimistic about the prospects for their company than they were three months ago, up from 18% in Q2, while 27% say they are less optimistic, down from 42%.
A third (34%) say that the level of uncertainty facing their business is high or very high, down from 43% last quarter and almost half the level seen immediately after last year’s EU referendum.
However there is little change in the proportion who say now is a good time to take risk onto their balance sheet, which stands at 24%, up slightly from 22% in Q2 and three times the level seen after the referendum.
Reducing costs remains CFOs’ top priority, with 41% citing it as a key focus, down from 46% last quarter. This is followed by introducing new products and services (39%, down from 42%) and increasing cash flow (35%, down from 36%).
The findings suggest CFOs are becoming less uneasy over the impact of Brexit. Over half (60%) say the business environment will be worse when the UK leaves the EU, down from 72% in the previous quarter, and 14% now say they see a better long term business environment, up from 8% last quarter.
However, Brexit still ranks as the top concern CFOs say their business faces, giving it (on a scale of 0-100) a ranking of 58, down from 60 last quarter. Brexit is followed by weak demand in the UK (53, down from 57) and the prospect of higher interest rates in the UK and US (49, down from 50).
David Sproul, senior partner and chief executive of Deloitte north west Europe, said: ‘Concerns over Brexit look to have eased slightly in this latest survey with just under two-thirds of CFOs expecting an adverse effect on the business environment, down from nearly three-quarters in Q2.
‘However, CFOs continue to see Brexit as being the top risk facing business. CFOs expect Brexit to have an impact on their business decisions, with almost a third expecting it to reduce their investment plans over the next three years and a third expect it to hit hiring.
‘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.’
Report by Pat Sweet
