Deloitte: CFOs regain confidence amid easing economic concerns
Sentiment among finance leaders of the UK’s largest firms has improved significantly since the start of the year, according to Deloitte’s UK CFO Survey Q1 2023.
The largest increase in confidence since the COVID-19 vaccine rollout was observed, with a net 25% of CFOs being more optimistic about their business prospects.
Deloitte’s latest quarterly CFO Survey, conducted between 21 March and 3 April 2023, captured sentiment amongst the UK’s largest businesses. A total of 64 CFOs participated, including the CFOs of 11 FTSE 100 and 24 FTSE 250 companies. The combined market value of the 38 UK-listed companies surveyed is £253 billion, or approximately 10% of the UK quoted equity market.
Perceptions of external financial and economic uncertainty have fallen at the fastest pace since this question was first asked in 2010. CFOs now rate external uncertainty at levels far below previous peaks.
Ian Stewart, chief economist at Deloitte, said: “The economic unpredictability that marked the beginning of 2023 has started to clear, with CFOs reporting the largest decline in perceptions of uncertainty to date. Business confidence has rebounded, helped by a decrease in energy prices, an easing of Brexit concerns and an improving inflation backdrop.
“Crucially, finance leaders report little change in credit conditions, suggesting that March’s events in the global banking system have not affected the pricing and availability of credit for UK corporates.
“Despite a brighter outlook, CFOs are alive to the continued risks facing the economy. Corporates remain in defensive mode and CFO risk appetite is subdued.”
Only 17% of CFOs saying this is a good time to take greater risk onto their balance sheets. CFOs are instead heavily focused on cost control and building up cash. Although CFOs’ revenue growth expectations have jumped, a large majority of respondents expect margins to shrink in the next 12 months, reflecting continued growth in input costs.
CFOs see Brexit, high energy prices, and disrupted energy supplies posing significantly less risk to business than they did in Q4 2022. Falling energy prices and the announcement of the Windsor Framework, which aims to improve the flow of goods between Britain and Northern Ireland, have contributed to the easing of CFO concerns around Brexit.
Finance leaders report a fall in supply disruptions faced by their businesses this quarter. CFOs also reported a marked easing of recruitment difficulties in the first quarter, while expectations for inflation in one year’s time have declined from 5.8% to 4.2%, and eventually to 2.9% in two years’ time.
Mr Stewart added: “The CFOs foresee artificial intelligence helping to drive UK productivity, an outcome that could provide a lasting boost to business growth.
“They are divided, however, on how AI will affect the number of jobs in the economy, highlighting the need to ensure the gains from new technologies are widely shared.”