UK CFOs are the most optimistic they have been in 18 months as the shock of Brexit starts to ease, but their appetite for risk remains subdued compared to before the referendum vote, according to research from Deloitte
The firm’s Q1 2017 CFO Survey polled 130 CFOs of FTSE 350 and other large private companies prior to the prime minister triggering Article 50.
The findings show 31% of CFOs say they are more optimistic about prospects for their company than they were three months ago, up from 27% in Q4 and just 3% immediately after the referendum. This is the highest level since Q2 2015, when 35% were more optimistic.
The proportion saying they are less optimistic has dropped to 17%, down from 22% last quarter and 74% after the referendum. A third (34%) now report high or very high levels of uncertainty facing their business, down from 50% last quarter.
Risk appetite continues to climb, with 26% saying now is a good time to take risk onto their balance sheets, up from 21% in Q4 and 8% after the referendum. However, this compares to 51% 12 months prior to the referendum.
The majority (60%) of CFOs still say the business environment will be worse when the UK leaves the EU, although this is down from 66% in the previous quarter, and 19% now expect improvements, up from 14% in Q4.
When asked about the effects of Brexit on corporate spending, CFOs’ attitudes continue to soften. While a quarter (26%) say Brexit will see their own capital spending decrease, this compares with 66% following the vote. Brexit remains the top risk for CFOs but the degree of concern has fallen to levels similar to other risk factors.
Ian Stewart, chief economist at Deloitte, said: ‘Brexit still tops the risk list, although at a lower reading than the last two quarters. CFOs believe the Brexit headwinds have eased and see far less damage to their spending plans than earlier expected. While most still see Brexit having an adverse effect on the business environment, even here the degree of negativity has fallen.
‘Crucially, two longstanding sources of risk - concerns about weakness in emerging markets and the euro area - have fallen significantly. The decline in concern about the euro area is the largest recorded for any risk factor, indicating growing confidence about Europe’s recovery.’
The Deloitte CFO survey is here.
