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Survey reveals waning CFO optimism

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11th Apr 2011
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The mood of optimism with which UK CFOs entered 2011 has weakened to a two year low, according to Deloitte’s recent CFO Survey.

High levels of inflation and concerns about the effects of fiscal tightening have resulted in CFOs remaining cautious about the sustainability of the recovery.

Of the 137 large companies surveyed, CFOs remain, on balance, positive, but optimism has dropped back to the lowest level in two years.

The fiscal squeeze is expected to reduce UK corporates’ potential profits by 7% this year, while 83% see the fiscal squeeze reducing their companies’ 2011 profits.

Contrary to the fall in optimism, risk appetite has risen to the highest level since the CFO Survey started in Q3 2007, with 41% of CFOs saying that this is a good time to take risk on to their balance sheets.

Margaret Ewing, Deloitte partner and vice chairman, said: “Reduced optimism among finance chiefs seems to be influenced by external events, such as conflict in the Middle East and the earthquake in Japan, and movements in financial markets. By contrast, high levels of risk appetite seem to reflect longer term judgements and more positive views on corporate balance sheets, the opportunities available to companies and financial conditions.”

Ian Stewart, Deloitte chief economist, added: “While corporate profits have rebounded strongly from their lows, high inflation and the prospect of higher interest rates may limit the scope for margin growth from here. CFOs are less confident than the Bank of England that inflation will decline over the next two years. Most CFOs think there is a less than even chance of inflation falling back to its 2.0% target in two to three years.

Visit the Economy discussion group thread to view further info from Deloitte’s new CFO Survey.

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