Firms’ chief financial officers gloomy on economic prospects
AQUARTERLY survey from accountancy giant Deloitte has shown that 42% of chief financial officers (CFO) are less upbeat about their company’s prospects than they were during the last quarter, when as few as 17% reported a decline in confidence.
Only 18% reported a brighter outlook in the second quarter, down from 31% during the previous three months.
The poll – which quizzed 122 CFOs from the FTSE 350 and other large private companies – also recorded a more downbeat view on Brexit, with 72% expecting the business environment to worsen after the UK leaves the EU, up from 60% in the first quarter.
Just 8% said Brexit would improve conditions for companies.
It marks the highest level of pessimism surrounding the impact of Brexit since the referendum last year, with CFOs adding that Britain’s divorce from the bloc remains the biggest risk to business, followed by weak demand in the UK.
Corporate spending is also expected to take a hit as a result of Brexit, with 33% forecasting a drop in capital expenditure, while 38% say Britain’s divorce from the bloc will negatively impact on hiring, compared to 30% in the first quarter.
David Sproul, senior partner and chief executive of Deloitte North West Europe, said: “Business sentiment is highly sensitive to political developments and surprises. The outcome of the general election, like the result of last June’s EU referendum, was hugely unexpected and has knocked optimism.
“A period without such large shocks, and with the negotiations with the EU gaining direction and momentum, should help bolster business sentiment.
“Nonetheless, this underscores the importance of the Brexit negotiations producing a favourable environment for UK businesses, with access to the skills and markets they need for their future success.
“Business and government must work closely together to achieve this.”
Last week, Britain’s biggest business lobby, the Confederation of British Industry (CBI), renewed calls for the UK to maintain membership in the Single Market and Customs Union until a final deal with the EU is reached.
CBI director general Carolyn Fairbairn said in a lecture at the London School of Economics that negotiators must strike transitional agreements as soon as possible, in order to reduce uncertainty and protect jobs.
However, Prime Minister Theresa May said Britain would not be able to strike its own free trade agreements with other countries and remain a member of the EU Customs Union at the same time.
Deloitte’s survey showed that fewer businesses are now willing to take risks, down from 26% to 22%, while a higher number of CFOs said uncertainty was high or very high, at 43%.
Around 43% expect hiring to slow over the next 12 months, up from 28% in the first quarter.