While economic predictions for the coming year are looking gloomy, with a dip in GDP numbers in Q3 of 2023 and a backdrop of limited growth, chief financial officers (CFOs) remain hopeful going into 2024.

Sentiment has risen for the second quarter in a row and is above average levels while corporate risk appetite has risen to its highest level in 18 months, although still subdued compared with the long-run average, revealed the Deloitte CFO Q4 survey.

‘CFOs’ strategies remain defensive, on balance, despite a slight easing in defensiveness in this quarter’s survey. The move was largely due to a softer focus on reducing leverage with the recent decline in market interest rate expectations,’ Deloitte said.

The majority (92%) expect staffing and labour to be the highest cost in 2024, followed by 63% who planned to invest in new technology. On the job side, they expect the level of high skilled immigration from outside the EU will increase, helping to reduce current skills shortages. They suggested the amount of skilled labour once supplied by the EU will begin to flow in from elsewhere, despite government plans to tighten immigration rules.

Supply chains look to be an issue as 44% of CFOs believed there would be ‘greater diversification and near-shoring of supply chains’ due to ongoing conflicts in the Middle East and Ukraine, and attacks on oil tankers in the Red Sea will cause global distribution disruption for some time. There are also concerns this could lead to an increase in inflation due to higher shipping costs.

In the last quarter of the year, nearly two thirds (63%) said that geopolitical risks were a danger to their businesses, up from 59% in the third quarter.

Half of businesses said their primary objective would be reducing costs, with 47% stating that increasing cash flow was a secondary objective.

Ian Stewart, chief economist at Deloitte said: ‘These findings may seem at odds with recent economic news, particularly a contraction in third quarter GDP and forecasts of sluggish UK growth in 2024.

‘But, while the pace of growth softened in 2023, activity proved more resilient than expected, with unemployment at low levels, corporate profitability holding up and an absence of stress in financial markets. Crucially, inflation has fallen sharply since the summer, bolstering expectations of earlier interest rate reductions.’

‘Whilst finance chiefs are starting 2024 in positive spirits, this is tempered by high levels of uncertainty, concerns around geopolitics, and low UK productivity. CFOs foresee growth ahead but – based on their defensive balance sheet stance – not imminently.’

It appears the after-effect of the pandemic is wearing off with 57% of CFOs expecting the number of people working from home this year to decline.