UK finance leaders are entering the final quarter of 2025 in a cautious mood, with cost expectations rising sharply and profit forecasts falling to multi-year lows. Deloitte’s Q3 CFO Survey paints a picture of corporate resilience under strain, as high input costs, soft demand, and persistent inflation reshape investment priorities and confidence in the UK’s economic outlook.

The quarterly survey, which canvassed 68 chief financial officers of major UK-listed companies and large private firms, finds the balance of CFOs expecting margins to fall in the next 12 months has widened to -47%, down from -36% in Q2. Nearly half of respondents now see operating costs increasing by 10% or more over the coming year, the steepest reading since early 2022.

At the same time, expectations for inflation have firmed. CFOs now see consumer prices averaging 3.2% in a year’s time, compared with 2.9% last quarter. Although still above the Bank of England’s 2% target, this modest uptick suggests finance leaders are resigned to a longer path back to price stability.

Margin pressure intensifies

The sharp rise in expected cost growth stands in contrast to subdued revenue projections. Only 15% of CFOs expect their companies to achieve higher operating margins in the year ahead, while more than 60% anticipate a decline. Most cite wage inflation and energy costs as the primary culprits, though several also point to supply-chain volatility and renewed upward pressure on shipping rates.

Deloitte’s index of margin expectations is now close to its weakest since the pandemic era. The survey indicates that cost management, once viewed as a background discipline, has returned to the top of the corporate agenda. Nearly eight in ten CFOs list cost reduction among their top three priorities, up from two-thirds a year earlier.

The combination of sticky inflation and muted demand is prompting finance chiefs to adjust their balance-sheet strategies. The proportion of CFOs prioritising cost control over expansion or capital investment has climbed to 83%, while only 9% see this as a good time to take on greater risk, one of the lowest readings on record.

Investment outlook weakens

After a brief uptick in optimism earlier in the year, CFO sentiment around capital spending and hiring has cooled sharply. Just 14% of respondents now plan to increase capital expenditure over the next 12 months, down from 28% in Q2. Hiring intentions have softened too, with only 12% expecting headcount growth, compared with 24% in the previous quarter.

The retrenchment reflects a growing sense that the UK’s recovery has plateaued. GDP growth is expected to slow to 0.8%in 2026, according to Deloitte’s internal forecasts, with the survey revealing a clear divide between CFOs in consumer-facing sectors who report the sharpest deterioration in confidence, and those in energy and infrastructure, where investment pipelines remain comparatively robust.

“CFOs are balancing strong cost headwinds with an uncertain demand environment,” says Ian Stewart, Deloitte’s chief economist. “The result is a defensive mindset: conserving cash, delaying investment, and focusing on efficiency gains rather than expansion.”

This caution is mirrored in financial policy. A record 70% of CFOs rank cost reduction and margin protection as their leading priority, while the share focusing on capital investment has fallen to 13%. Expansion through M&A, once a popular growth lever, is now a priority for just 9% of respondents.

Inflation expectations and pricing power

Despite the recent easing in input prices for some sectors, inflation remains a central concern. Two-thirds of CFOs expect cost pressures to persist through at least mid-2026, citing global supply constraints, higher wage settlements, and renewed increases in transport and raw-material costs.

Yet many CFOs are struggling to pass these costs on. Deloitte’s data show that 58% of respondents report weaker pricing power than a year ago, with firms in manufacturing and retail particularly exposed. Only 10% say they can fully offset higher costs through price increases.

This squeeze on margins is forcing finance teams to revisit their operational models. Several respondents mention accelerating automation and AI adoption to improve productivity and contain labour costs. Others report increased scrutiny of procurement contracts and supplier terms, as treasurers seek to lock in cost certainty in an unpredictable environment.

For multinational firms, these findings offer a window into how UK-based subsidiaries may behave in 2026. CFOs across global groups are likely to face similar pressures to protect profitability while maintaining liquidity, particularly as cross-border inflation dynamics remain uneven.

Financing conditions remain tight

The survey suggests that the cost of credit is weighing heavily on corporate decision-making. Although the Bank of England’s August rate cut has provided modest relief, 74% of CFOs still view debt as costly relative to historic norms. Nearly half say tighter credit conditions are directly curbing investment or expansion plans.

The shift is especially apparent among mid-cap companies, where refinancing risk is rising. One in five CFOs report active efforts to extend maturities or reduce leverage, while another third have delayed planned debt issuance until market rates stabilise.

Liquidity, however, remains ample for most large corporates. The share of CFOs describing balance-sheet leverage as “high” has fallen to 18%, down from 26% a year earlier. Cash holdings remain strong, with more than half of respondents maintaining reserves equivalent to at least six months of operating costs. Treasurers continue to favour short-dated instruments as uncertainty around future rate cuts persists.

Risk landscape shifts

When asked to rank their most significant external risks, CFOs cite persistent inflation, geopolitical instability, and policy uncertainty as their top three. Concern about supply-chain disruption has eased compared with 2023 but remains elevated, while apprehension over political risk has intensified ahead of multiple global elections and ongoing trade tensions between the US, Europe, and China.

Economic and financial uncertainty continue to dominate the corporate risk agenda. Deloitte’s uncertainty index rose to its highest level since mid-2022, with 90% of CFOs describing the current environment as “above normal” or “high.” Only 2% consider it “low,” underscoring the lack of clarity on global demand and policy direction.

The survey also highlights growing divergence between sectors. CFOs in energy, healthcare, and infrastructure express relatively stable confidence thanks to long-term contracts and regulated returns. Those in consumer goods, retail, and technology report greater concern about discretionary demand and pricing flexibility.

Productivity and technology under the spotlight

Despite the retrenchment in capex, technology investment is one area that remains resilient. More than 60% of CFOs expect to increase spending on automation, AI, and digital transformation projects over the next 12 months, even as broader investment budgets tighten. Many view these initiatives as critical to offsetting wage inflation and maintaining efficiency.

Treasurers, too, are playing a role in this digital push. Deloitte’s findings show a marked rise in adoption of data-driven forecasting and liquidity tools, particularly among firms with global operations. CFOs note that better real-time visibility of cash positions has become essential in an environment of fluctuating rates and volatile costs.

For multinationals, this trend aligns with broader global priorities. As corporate treasury functions become more centralised, UK finance teams are increasingly expected to provide granular data on cash flow, hedging, and risk exposures, an area where automation and AI can deliver measurable efficiencies.

Labour market signals

While headline employment remains strong, CFOs report a softening in hiring sentiment. Net employment expectations have turned negative for the first time since late 2022, with most companies freezing recruitment or filling only critical roles. The proportion of CFOs citing labour shortages as a major risk has fallen from 52% to 37%, reflecting slower growth and some easing in wage pressure.

Nonetheless, wage costs remain elevated. More than half of CFOs expect pay settlements above 4% in the coming year, well above the pre-pandemic average. Many firms are responding with more targeted reward strategies, using performance-linked bonuses rather than across-the-board increases.

The shift suggests a cautious rebalancing of the labour market rather than a wholesale slowdown. As one CFO quoted anonymously in the survey put it, “We’re not cutting staff, but we’re also not expanding. The focus is on getting more productivity from the team we already have.”

Defensive posture set to persist

Looking ahead, Deloitte’s data suggest that caution will continue to define corporate strategy into 2026. Although inflation is expected to ease gradually and interest rates may fall further, few CFOs anticipate a rapid improvement in business conditions. Only 22% expect stronger revenue growth over the next year, while 48% foresee weaker demand.

At the same time, optimism about the broader UK economic outlook has declined for the second consecutive quarter. The survey’s optimism balance fell to -32%, its lowest since mid-2023. CFOs point to weak productivity, policy uncertainty, and limited fiscal headroom as key constraints on recovery.

Despite the subdued sentiment, the longer-term picture is not uniformly bleak. The survey highlights continued appetite for green and digital investments, as well as incremental improvement in supply-chain reliability. Firms are also showing greater sophistication in cash and risk management, reflecting lessons learned from the turbulence of recent years.

For treasurers and finance leaders, the message is one of pragmatism: maintain liquidity, focus on operational efficiency, and stay flexible as conditions evolve. As Deloitte’s Stewart concludes, “CFOs are not expecting a crisis, but nor are they preparing for a boom. This is a phase of consolidation - a time to protect margins, strengthen balance sheets, and position for eventual recovery.”