UK companies scaling back investments over emerging market slowdown fears
The UK’S biggest companies are scaling back investment plans as a slowdown in emerging markets and swings in financial markets temper their appetite to take on risk, according to survey figures published this morning.
The research, conducted by Deloitte, showed that 73 per cent of chief financial officers (CFOs) said the current level of financial and economic uncertainty is above normal, high or very high. The figure is up from 55 per cent three months ago and is the highest level of company uncertainty since 2013.
Greater uncertainty is impacting investment plans, with 47 per cent of CFOs saying now is a good time to take risk, down from 59 per cent three months ago.
The survey reveals that firms are now taking a more defensive stance by focusing more on cutting costs and plan to spend less on investment.
A slowdown in China, the world’s second biggest economy was a major concern with 60 per cent of CFOs expecting it to harm their business. But top of the list of worries was a rate rise by the Bank of England, with stability in Greece quelling fears over a renewed Eurozone crisis.
Deloitte chief executive David Sproul said there were still many reasons for firms to be optimistic at the moment.
“The UK economy is in pretty good shape. Low inflation and rising pay have rebooted consumer incomes. Boosted by cheap credit, consumer spending, which accounts for more than 60 per cent of the economy, has risen 3.1 per cent in the last year, the fastest rate in eight years,” Sproul said.
“Nor should we overdo the gloom on the external environment. The outlook for emerging market economies has softened, but the US is seeing a decent recovery, the Eurozone is growing again and the pace of activity seems likely to quicken into 2016.”