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Business investment outlook hits two year high

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9th Jul 2013
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Large companies are ready to move towards expansion with expectations for hiring, discretionary spending and investment rising to their highest levels in two years, according to the Deloitte CFO Survey.

The quarterly survey of finance directors found expectations had returned to levels last seen in early 2011 and that business optimism had risen for the fourth consecutive quarter.

Appetite for risk has sharpened, with 45% saying now is a good time to take risk on to their balance sheets - the highest in six years and more than double the level of last year.

The CFO survey placed greater emphasis on expansion through introducing new products or services and by acquisition, which has softened their focus on cost reduction to the lowest level in two years.

CFOs are reducing their focus on cost-cutting in favour of investment, with just 34% of respondents saying their priority was reducing costs, compared with 42% in the first quarter of the year.

According to those surveyed, credit is cheaper and more available than it has been for six years.

As a further sign of the improving domestic economic outlook, businesses deriving more than 70% of revenues from the UK have become more expansionary than in the past couple of years.

Ian Stewart, chief economist at Deloitte, said: “Business optimism has been improving for some time but our latest survey shows that CFOs are translating this confidence into action.

“Rising risk appetite and a shift towards expansion show that large UK corporates are increasingly planning for growth,” he said. “The recession-era focus on cost-cutting and debt reduction is easing.”

Perceptions of economic uncertainty have also dropped, with 73% of CFOs believing their businesses face an above normal level of external macroeconomic uncertainty, down from 97% in late 2011.

Deloitte surveyed 135 CFOs last month, including 37 from the FTSE 100 and 45 from the FTSE 250.

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