Deloitte CFO survey

Optimism grows but CFOs still keen to cut costs

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Geopolitical factors remain a key concern

Britain’s biggest companies remain resilient in the face of continuing pressures, according to a new survey revealing growing optimism for the year ahead.

Sentiment among finance leaders has risen for the second consecutive quarter – to well above average levels – with a net 11% of CFOs more optimistic about the financial prospects of their business than they were three months ago.

However, strategies remain largely defensive with cost reduction remaining a strong priority over the next 12 months.

Ian Stewart, chief economist at Deloitte, said: “These findings may seem at odds with recent economic news, particularly a contraction in third quarter GDP and forecasts of sluggish UK growth in 2024.

“But, while the pace of growth softened in 2023, activity proved more resilient than expected, with unemployment at low levels, corporate profitability holding up and an absence of stress in financial markets. Crucially, inflation has fallen sharply since the summer, bolstering expectations of earlier interest rate reductions.”

Conducted between 28 November and 12 December 2023, a total of 72 CFOs participated in this quarter’s Deloitte CFO Survey, including the CFOs of 12 FTSE 100 and 26 FTSE 250 companies.

Inflation worries and interest rate expectations ease

The inflation and rate worries that dominated the CFO Survey for much of the last two years have eased since the last quarter.

The risk of higher inflation has dropped down CFOs’ list of concerns.

Finance leaders expect price and wage pressures to soften over the next two years. They see the Bank of England’s base rate falling from its current level of 5.25% to 4.75% in a year’s time.

Geopolitical factors again rated biggest risk

CFOs again see geopolitical factors as the greatest external risk to their own businesses over the next 12 months, with a net 44% of CFOs expecting greater diversification and near-shoring of supply chains in the longer term.

There is also increased anxiety about productivity and competitiveness in the UK economy, which is now second on the risk list, following by higher energy prices, or disruption to supply.

Anticipated higher labour costs, but more investment in technology

There is a strong consensus among finance leaders that the UK has entered a prolonged period of high labour costs. But CFOs are decidedly bullish on investment in new technology.

Finance chiefs also anticipate a greater role for the state in the economy, with significant proportions expecting an increase in levels of taxation.

By contrast, CFOs think that levels of flexible or home working have peaked, with a net 57% expecting home working to decline in the long term.

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