Optimism and risk appetite among chief financial officers (CFOs) has fallen in the third quarter, with fewer CFOs saying they are more optimistic about the prospects for their company compared to the previous quarter, and fewer saying that now is a good time to be taking risk onto their balance sheets. These findings from Deloitte’s latest CFO Survey suggest that concerns about the effects of Brexit on the UK business environment have increased and that financial executives are now more likely to reduce corporate spending over the coming year.
Effect on business spending
Fewer of the survey's respondents were optimistic about their company's revenues. Just under a third – 31 per cent – of CFOs say they expect revenues to rise in the coming 12 months, down from 42 per cent in Q2. The survey results suggest that Brexit is having an increasingly negative effect on business spending plans, as almost eight out of 10 CFOs (79 per cent) say they expect the long-term business environment to be worse as a result of leaving the EU, up from 75 per cent in Q2. According to Deloitte, views on the long-term business environment are now at their most pessimistic since the Brexit referendum in June 2016.
Drop in confidence
This marks the third consecutive quarter that concerns about the impact of Brexit have increased. David Sproul, senior partner and chief executive of Deloitte North West Europe, said: “The drop in business confidence and the resultant impact on planned capital investment highlights the effect a possible no-deal Brexit is having on businesses across the UK. A deal with a sensible transition period would remove the uncertainty and should deliver a real boost to business spirits. Our survey also shows that beyond the future trade deal access to skills for business is an increasingly pressing issue. It’s crucial that a post-Brexit immigration system ensures that business has access to the skills it needs to thrive.”
Capital expenditure cuts
More CFOs in this quarter's survey also said that hiring will slow over the next three years as a result of Brexit, and capital expenditure will also slow. The proportion of CFOs who expect to reduce their own capital expenditure as a consequence of Brexit is at its highest level in more than two years. The survey found that CFOs have sharpened their focus on defensive balance sheet strategies with a greater emphasis on cost reduction than at any time in the last nine years. More than half (53 per cent) cite cost control as a strong priority, up from 47 per cent in Q2. This is followed by increasing cash flow, a priority for 48 per cent of CFOs.
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