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UK PLC Loses Its Appetite For Risk : CFO Survey

Posted on October 5, 2015 at 8:10 AM

George Osborne, the UK 's Chancellor of The Exchequer, is looking a little isolated in his cheerleader role for China this moring.


Corporate risk appetite and sentiment has faded in the face of weakness in emerging economies and global equity markets according to Deloitte’s latest survey of Chief Financial Officers (CFOs). It has guaged the views of 122 CFOs of FTSE 350 and other large private UK companies.

 

 

CFOs’ perceptions of external financial and economic uncertainty have seen the sharpest rise since this question was first asked five years ago. 73% of CFOs say the level of financial and economic uncertainty is above normal, high or very high. This is up from 55% in Q2 and marks a return to the level last seen in Q2 2013.

 

 

Rising risk aversion is feeding into a more defensive stance on the part of major corporates, with a greater focus on cost reduction and rather less on investment, says Deloitte.  47% of CFOs say now is a good time to take risk on to their balance sheet, down from 59% in Q2 2015.


 

UK CFOs are generally not a cheery bunch at the moment. 29% of them are less optimistic about the financial prospects for their company than they were three months ago, compared to 20% in Q2, while 19% are more optimistic, compared to 36% in Q2.


 

The survey reveals dips in expectations for hiring and capital expenditure. 41% of CFOs say they expect UK corporates to increase capital expenditure over the next 12 months, down from 66% in Q2, while 48% say businesses will increase hiring over the next year, down from 70% in Q2.


 

Asked to rate the factors that pose threats to their business (on a scale of 0 to 100), CFOs attach a rating of 48 to the prospect of higher interest rates, 47 to weakness in emerging markets and geopolitical risks (up from 43 in Q2’s survey) and 47 to deflation and economic weakness in the euro area.


 

In a separate question, 60% of CFOs said that the slowdown in China will have a negative effective on their business in the next twelve months.


 

The full report is here.

 

 


 

Categories: Behaviour, Governance, Investors