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CFOs optimistic as Brexit worries recede

Business confidence is at an all-time high among the UK’s top CFOs, according to the latest Deloitte CFO survey. And for the first time since the EU referendum, Brexit is no longer the top risk for finance leaders.

15th Jan 2020
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Since the EU referendum, Deloitte’s quarterly CFO survey has reflected the uncertainty that paralysed Westminster for nearly three years. But with Boris Johnson’s landslide victory overcoming the Brexit stalemate, 53% of CFOs are feeling more optimistic about the prospects for their companies than they were three months ago.

“The fog of uncertainty that has lingered over the UK since the 2016 EU referendum is lifting," commented Ian Stewart, the chief economist at Deloitte. 

“CFOs’ perceptions of external uncertainty have fallen from one of the highest ever readings to near-average levels, and they are beginning 2020 with sentiment levels that would have been unimaginable at any time in the last three years.” 

With the UK set to leave Europe on 31 January, Brexit is now only the third biggest concern for finance chiefs in Q4 2019, behind weak UK demand and geopolitical risks. This is the first time since the UK voted to leave in 2016 that Brexit worries didn’t plague CFOs.

Although their concerns are thawing, CFOs are still not expecting a rosy post-Brexit economy, with 66% expecting the overall business environment to deteriorate as a result of the UK’s farewell to Europe.

But this figure has decreased from the anxiety-fueled highs of Q2 2019, when 83% foresaw a bleaker business climate. Since then, survey respondents have grown more optimistic about post-Brexit business, with 18% now feeling positive compared to 8% in Q3 last year.

Freed from European worries, 53% of respondents are expecting revenues to rise in the coming 12 months. It’s a different story to the previous quarter when 62% felt their firms faced a high or very high level of uncertainty.

Reassured post-election, CFOs’s appetite for risk is at its highest since the end of 2015, with 31% willing to spin the wheel with their balance sheets. As such, the quarterly survey saw an uptick in CFOs expecting an increase in capital expenditure in the next 12 months, from 6% in Q3 to 38%. Hiring expectations also surged among CFOs from 3% in Q3 to 27%, the highest level since Q4 2015.

Regardless, the usual pressures continue to blight finance departments, with cost control remaining a strong priority for half the respondents and increasing cash flow the priority for 45%.

Deloitte received responses from 119 CFOs, including those from 26 FTSE 100 and 46 FTSE 250 companies. The total market value of the UK-listed companies that participated is £695bn, approximately 27% of the UK quoted equity market.

The CFOs’ Q4 2019 positivity mirrors the immediate post-election boost to the pound. Eyes will be watching next quarter’s survey to see if this confidence holds, or if their optimism will shrivel in the face of fears the UK won’t strike a trade deal or if the fall in inflation means a cut in interest rates.

Commenting on the results of the CFO survey, Deloitte’s Richard Houston was encouraged by the “dramatic uptick in business confidence”. However, the big question, he says, “is to what extent positive expectations for revenues, spending and hiring, translate into an actual strengthening of corporate activity in 2020”.

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