Highlights
- 81% of CFOs now expect Brexit to lead to a deterioration in the overall environment for business in the long term
- The key strategy for the majority of businesses is to raise cash levels as CFOs are placing a greater emphasis on cash accumulation
After the chaos of the last few weeks the UK is still coming to terms with the latest Brexit twist and many people all over the country are still very much unsure of the short- and long-term consequences of the latest turn of events.
However, the latest quarterly survey of chief financial officers (CFOs), just released by Deloitte, certainly gives us a very clear picture of how CFOs all over the country are feeling.
The results show that CFO pessimism over the long-term effects of Brexit rose to its highest level since the EU referendum in 2016.
Indeed, 81% of CFOs now expect Brexit to lead to a deterioration in the overall environment for business in the long term.
The survey is the first since parliament’s continual rejections of the Brexit deals offered by Theresa May and gauges sentiments among the UK’s largest businesses with Deloitte interviewing 89 CFOs, including 48 representing FTSE 100 companies and smaller firms on the FTSE 250.
The results are very clear UK businesses are “battening down hatches for tougher times” which for a large portion means reining in recruitment and spending.
Nearly half (49%) of CFOs said they envisage reducing their capital expenditure and 22% anticipate having cut back on mergers and acquisitions.
Meanwhile, more than half (53%) of CFOs also expect to reduce hiring staff because of Brexit – the highest level in more than two years.
“Put mildly, it’s been a turbulent few weeks and there’s been little change in confidence and risk appetite among CFOs, as many priced in a tougher environment at the start of the year” Deloitte’s chief economist, Ian Stewart, said.
“They went into March braced for tough times and the latest round of Brexit uncertainties have not materially changed that picture. When expectations are already low, it’s harder to be disappointed.”
Outsource your Accounting Service to a trusted Offshore Partner and focus on your core activities
The findings highlight that UK businesses are facing three distinct pressures.
Firstly, CFOs indicate that “growing economic headwinds” has resulted in CFOs becoming noticeably more negative on revenue growth in the last six months.
Second, CFOs signify that cost pressures are increasing, with a record 79% of CFOs expecting operating costs, expressly wages, to rise in the next year especially as official data shows average earnings are growing at close to their fastest pace in 11 years.
Thirdly, CFOs report that credit conditions have become less accommodative as credit pricing and availability has deteriorated in the last two years.
The findings show us that the key strategy for the majority of businesses is to raise cash levels as CFOs are placing a greater emphasis on cash accumulation than at any time since 2010.
As to what will happen over the next few months before we start up with the deadline chaos again, well no one really knows although if the current defensive strategies being taken by CFOs continues, we will have to see how the UK’s economic landscape looks.
