Firms’ fi­nance chiefs see cost-cut­ting as a pri­or­ity

Sur­vey: Un­cer­tainty over Brexit weighs on minds of chief fi­nan­cial of­fi­cers

The Press and Journal (Aberdeen and Aberdeenshire) - - BUSINESS - BY RE­BECCA BUCHAN

Per­sis­tent Brexit un­cer­tainty has knocked busi­ness con­fi­dence among fi­nance chiefs to some of the low­est lev­els in re­cent years.

Deloitte’s lat­est CFO Sur­vey shows 58% of chief fi­nan­cial of­fi­cers (CFOs) say cost re­duc­tion is a strong pri­or­ity, while 65% re­port high or very high lev­els of fi­nan­cial and eco­nomic un­cer­tainty.

The sur­vey also showed that fol­low­ing Brexit, weak do­mes­tic de­mand will be­come the sec­ond great­est risk fac­ing busi­nesses.

The Deloitte CFO Sur­vey

“Busi­nesses in the UK have long shown them­selves to be adapt­able”

gauges sen­ti­ment among the UK’s largest busi­nesses.

A to­tal of 91 CFOs par­tic­i­pated in the lat­est ques­tion­naire, in­clud­ing fi­nance bosses at 59 FTSE 350 com­pa­nies.

The Q3 2019 CFO sur­vey ran be­tween Septem­ber 17 and 30, 2019.

It showed in­creas­ing cash flow is a strong pri­or­ity for 48% of CFOs, up from 42% last quar­ter, and re­duc­ing lever­age is a pri­or­ity for 19%, up from 17%.

In ad­di­tion, 70% of CFOs ex­pect hir­ing to re­duce in the next 12 months and just 3% ex­pect it to rise.

Stephen Wil­liams, se­nior part­ner for Deloitte in Scot­land, said: “Per­cep­tions of un­cer­tainty are el­e­vated and cor­po­rate risk ap­petite is van­ish­ingly low.

“The pri­or­ity ap­pears to be curb­ing costs, not ex­pan­sion.

“With Brexit cited as the big­gest risk busi­nesses face, the last quar­ter has also seen height­ened con­cern over slow­ing growth in the UK and eu­ro­zone and CFOs are tight­en­ing their purse strings in re­sponse.”

While the ef­fects of Brexit con­tinue to be the largest risk fac­ing busi­nesses, do­mes­tic eco­nomic con­di­tions are weigh­ing heav­ier on CFOs’ minds.

Weak de­mand in the UK is the sec­ond big­gest risk and at the high­est level in five years.

Poor pro­duc­tiv­ity and weak com­pet­i­tive­ness in the UK also rose in the same pe­riod.

Con­cerns over Euro­pean growth have also risen with the rat­ing for de­fla­tion and eco­nomic weak­ness in the euro area, and the pos­si­bil­ity of a re­newed euro cri­sis, up from 42 to 51.

The re­port said there has been a small shift in where CFOs see Brexit hav­ing an ef­fect on their busi­ness plans. While 28% say it will cur­tail M&A ac­tiv­ity, up from 25% in Q2, 45% say cap­i­tal ex­pen­di­ture will slow.

Six in 10 (60%) fore­cast a de­crease in hir­ing rates, down from 62% in Q2.

Over­all though, 76% of CFOs be­lieve that the longterm busi­ness en­vi­ron­ment in the UK will be worse as a re­sult of leav­ing the EU, down from 83% in Q2.

Mr Wil­liams said: “Cor­po­rate risk ap­petite is be­ing sup­pressed both by Brexit and macroe­co­nomic un­cer­tainty, but there are some pos­i­tives: un­em­ploy­ment has fallen and earn­ings are ris­ing at the fastest rate in more than a decade.

“While it’s un­clear whether th­ese trends will be sus­tain­able, I do take con­fi­dence from the fact that busi­nesses in the UK have long shown them­selves to be adapt­able and re­silient to change.

“We now need clar­ity on what that change looks like.”

FLAG­GING UP CON­CERNS: Busi­nesses have said that Bri­tain’s exit from the Euro­pean Union is the big­gest risk that they face

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