There is a record level of business optimism among the UK’s finance leaders with CFOs anticipating a strong recovery in profits over the next year, reported Deloitte’s UK CFO Survey Q1 2021
The latest quarterly CFO survey captured the sentiment among the UK’s largest businesses at the height of the third lockdown. The survey revealed that UK CFOs believe the pandemic will have a less negative effect than previously predicted, with the proportion who think it will reduce capital spending in the next three years dropping from 65% last summer to 19%. Also, the proportion expecting the pandemic to reduce hiring has fallen from 74% to 29%, over the same period.
The research comes as the UK further eases lockdown restrictions and with the initial success of its mass vaccination programme, the number of CFOs rating the external financial and economic uncertainty as high or very high declining from 71% at the end of Q4 2020 to 46% now.
CFOs are also confident about returning to the office, with 67% now thinking that the bulk of their companies’ employees will return to the office by Q3 2021.
The only category of macro risk where concerns have risen sharply relates to the side effects of strong growth, in the form of inflation and asset price bubbles.
Richard Houston, Deloitte’s senior partner and CEO, said: “It’s encouraging to see such a marked increase in sentiment amongst CFOs. The focus now needs to centre on expanding capacity and improving supply chains so that pent-up demand can be successfully met. Making the most of the long-term transformations sparked by the pandemic will be key to the future recovery of businesses and the economy.”
The survey also revealed that economic uncertainty around Brexit has also declined from the record levels seen in 2020. Close to 10% of the surveyed CFOs have experienced significant or severe disruption to their business due to Brexit, but many believe these disruptions will fade with only 3% believing the severe disruptions will continue into next year.
Although CFOs continue to think Brexit will negatively impact the UK business environment, the issue of the UK’s departure from the single market and customs union, CFO hiring, investment and M&A activity concerns have dropped considerably since the end of 2020.
The Deloitte CFO Survey is the only survey of major corporate users of capital that gauges attitudes to valuations, risk and financing. The latest survey saw 100 CFOs participate, including CFOs of 21 FTSE 100 and 42 FTSE 250 companies, and was conducted between 17 and 30 March 2021.