CFO’s Brexit concerns at record high

CFOs are currently more worried about the long term impact of Brexit than at any time since the referendum according to a quarterly survey from Deloitte, which shows marked falls in optimism and risk appetite

The firm’s Q3 2018 CFO Survey polled 95 CFOs of FTSE 350 and other large private companies in late September. The combined market capitalisation of the 66 UK-listed companies who participated is £383bn, approximately 15% of the UK quoted equity market.

The proportion of CFOs who say they are more optimistic about the prospects for their company than they were three months ago, has fallen to 13% compared with 24% in Q2.

Fewer (12%) of CFOs say that now is a good time to be taking risk onto their balance sheets, down from 16% in Q2, while less than a third (31%) now say they expect revenues to rise in the coming 12 months, down from 42% in Q2.

More CFOs (79%) say they expect the long-term business environment to be worse as a result of leaving the EU, up from 75% in Q2. Deloitte says this marks the third consecutive quarter that concerns about the impact of Brexit have increased and this reading is now the highest since the referendum.

CFOs are more negative on the effects of Brexit on their hiring and spending decisions. Half (50%) say hiring will slow over the next three years as a result of Brexit, up from 40% in Q2, and 44% say capital expenditure will slow, up from 34%.

CFOs are also more concerned about the risk Brexit poses to their business. Rating risks on a scale from 0 to 100, the effects of Brexit scored at 67 (up from 60 in Q2).

The findings suggest CFOs have sharpened their focus on defensive balance sheet strategies with a greater emphasis on cost reduction than at any time in the last nine years - 53% cite cost control as a strong priority, up from 47% in Q2.

CFOs expect UK corporates to reduce capital expenditure over the next 12 months. The proportion of CFOs who expect to reduce their own capital expenditure as a consequence of Brexit is at its highest level in more than two years.

Ian Stewart, chief economist at Deloitte, said: ‘CFOs have become more pessimistic about the long-term effect of the UK’s departure from the EU.

‘79% expect Brexit to lead to a deterioration in the business environment and only 6% anticipate that Brexit will result in an improvement in the business climate compared with 14% a year ago.

‘Large corporates are pulling in their horns, with just 12% of CFOs saying now is good time to take a risk and 44% expecting their own capital spending to be lower over the next three years.’

Report by Pat Sweet

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