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People high fiving AccountingWEB CFOs embrace the new year optimistic and hopeful
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CFOs embrace the new year with optimism

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Emerging from a year of high interest rates and inflation, CFOs are beginning the year in positive spirits with expectations that these challenges will decrease, according to Deloitte’s quarterly CFO survey. 

10th Jan 2024
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The start of 2024 has sparked a wave of optimism, with Deloitte’s survey showing a continued increase in positive sentiments among CFOs for the second consecutive quarter. 

A total of 11% more CFOs from the UK’s largest firms expressed greater hope and certainty regarding their business’s financial prospects compared to three months ago. The biggest reason for this is the decreased worries that CFOs have about inflation and high interest rates. 

Challenges ease 

Deloitte's survey, conducted with 72 CFOs from 35 UK-listed companies, found that inflation and rate concerns have eased since the last quarter. The weighted average rating of the risk of higher inflation was at 58% in the last quarter and has now dropped down to 53%. 

The threat of increased inflation and further rises in the interest rate has therefore decreased, contributing to a renewed sense of confidence among CFOs. 

Ian Stewart, chief economist at Deloitte, said that these findings might seem contradictory to recent economic updates, especially the third-quarter GDP contraction alongside predictions of slow growth in the UK for 2024.

“But, while the pace of growth softened in 2023, activity proved more resilient than expected, with unemployment at low levels, corporate profitability holding up and an absence of stress in financial markets. Crucially, inflation has fallen sharply since the summer, bolstering expectations of earlier interest rate reductions,” Stewart said. 

Finance leaders are also anticipating price and wage pressures to soften within the next two years. They see the Bank of England’s base rate dropping from its current level of 5.25% to 4.75% in a year’s time. 

Alongside this, 63% of CFOs anticipate a rise in long-term investment in new technology, reflecting their confidence in using technology to improve their business.

All these factors have contributed to an increased optimism and a brighter outlook for the year ahead.

Continuing concerns 

Yet, the survey indicated a heightened concern regarding geopolitical factors, with 63% of CFOs, up from the previous 59%, identifying these elements as the primary external risk to their business.

CFOs continue to maintain a predominantly defensive stance, prioritising cost reduction and increasing cashflow for the next 12 months. Expansionary strategies like introducing new products or entering new markets have notably diminished, with only 15% of CFOs saying it is a strong priority. 

“Whilst finance chiefs are starting 2024 in positive spirits, this is tempered by high levels of uncertainty, concerns around geopolitics, and low UK productivity. CFOs foresee growth ahead but – based on their defensive balance sheet stance – not imminently,” Stewart said. 

"Corporates are focused on cutting costs and building up cash rather than hiring, capital spending or M&A. But unlike in previous periods of uncertainty the financial system is operating and larger corporates can access debt, albeit at higher rates,” he continued.

Stewart mentioned that this situation is less concerning for larger corporations due to their increased ability to navigate challenging periods, making them less vulnerable to constrained credit conditions.

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By FactChecker
10th Jan 2024 18:41

Clueless the lot of them - or at least blinkered to the point of exclusion regarding anything other than the immediate outlook for their particular sphere. Any high spirits must be whisky left on the shelf.

No-one, least of all a typical CFO, has managed to develop a new economic model of how all the financial components interact with each other in this world - where global activities (by rogue states and/or international conglomerates) have major impacts that are entirely impervious to the policies of local politicians.

"inflation and rate concerns have eased" appears to be true (albeit without any agreement as to what is driving that), whilst "unemployment at low levels" is triggering all sorts of problems (including the availability and affordability of skills through to lack of investment in re-skilling).
And many of these issues are no longer predictable in terms of their impact on the bigger picture - which reacts faster (often over-dramatically) to perceived market sentiment (making subjects like AI the plaything of the media and of those who manipulate 'influencers') ... leaving a comprehensive vacuum of moral dimensions for others, without any sense of planning for the future.

"CFOs continue to maintain a predominantly defensive stance, prioritising cost reduction and increasing cashflow. Expansionary strategies like introducing new products or entering new markets have notably diminished." ... this says it all.
Understandable individually, but a parochial (lack of) vision that bodes ill.

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By Justin Bryant
11th Jan 2024 09:49

Barring unforeseen global calamities, I predict 2024 will be a boom year. Just look at global stock markets. Debt levels just keep going up. Magic money trees are everywhere it seems.

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