Post-election business confidence at record high

Business sentiment has surged to an all-time high in the wake of December’s election, recording the largest increase in confidence amongst the UK’s biggest companies for over a decade, according to research by Deloitte

The Big Four firm’s latest CFO survey took place during the period immediately after the election and over the New Year and polled 119 CFOs, including CFOs of 26 FTSE 100 and 46 FTSE 250 companies.

Overall, half (53%) of CFOs said they are more optimistic about the prospects for their company than they were three months ago. This is up significantly from just 9% in the Q3 2019 survey and the highest level ever in the 11-year period the survey has been running.

CFOs also reported feeling increasingly positive about revenues and risk. Half (53%) said they expect revenues to rise in the coming 12 months, up from 18% the previous quarter.

Only a third (34%) now state there is a high or very high level of uncertainty facing their business, compared to 62% pre-election.

As a result, risk appetite has risen to its highest level since Q4 2015, with 31% saying now is a good time to take risk onto their balance sheets, up from 7% in the previous quarter.

Over a third (38%) of CFOs now expect UK corporates to increase capital expenditure in the next 12 months, up from only 6% in Q3, representing the highest percentage since Q3 2015.

Hiring expectations also jumped to their highest level since Q4 2015, with 27% of CFOs now expecting hiring to increase in the coming year compared to 3% the previous quarter.

CFOs are less concerned about Brexit, which has been rated their biggest concern in surveys since the 2016 referendum, but has now dropped to third place.

Instead, on a scale of 0-100, weak demand in the UK took over as the largest risk at 57, followed by geopolitical risk at 56, down from 59, and the effects of Brexit at 54.

While two thirds (66%) of CFOs expect the overall environment for business to deteriorate as a result of the UK’s departure from the EU, this is down from a high of 83% in Q2 2019 and 76% in Q3. Those who expected a long-term improvement for business as a result of the UK leaving the EU rose from 8% to 18%.

Ian Stewart, chief economist at Deloitte, said: ‘The fog of uncertainty that has lingered over the UK since the 2016 EU referendum is lifting.

‘CFOs’ perceptions of external uncertainty have fallen from one of the highest ever readings to near-average levels, and they are beginning 2020 with sentiment levels that would have been unimaginable at any time in the last three years.’

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